What is Domestic Reverse Charge VAT?
Domestic Reverse Charge VAT (DRC) is a new way of accounting for VAT. From 1st March 2021 DRC applies to all VAT registered construction businesses in the UK. Put simply, the legislation moves the VAT liability from the supplier (subcontractor) of a service in the construction industry to the customer (contractor).
Why is it being introduced?
The legislation has been introduced as an anti-fraud measure designed to counter sophisticated criminal attacks on the UK VAT system. It intends to cut down on “missing trader” fraud, where companies receive high net amounts of VAT from their customers but have no intention of paying the VAT to Her Majesty's Revenue and Customs.
Who will it affect?
All UK construction businesses that are VAT registered who supply or receive construction and building services and report their incomes under the Construction Industry Scheme (CIS).
What development has WorkflowMax rolled out to help?
From today, there’ll be a new way to recognise DRC within WorkflowMax.
You’ll be able to:
- Setup DRC VAT rates with in your WorkflowMax account
- Enable the “DRC” rate for specific clients
- Apply DRC rates to your task and cost items on quotes and/or invoices
- Produce quotes or invoices within WorkflowMax and push them to Xero with the correct DRC tax rates