How do I post reverse charges?

Summary

This article explains how to post reverse charges to be included in your VAT return.

More Information

The rules around reverse charging and how post this through your VAT return can be found on HMRC's website.

Your invoice should be posted through the Purchase Ledger as usual. Please ensure your supplier is set up correctly for the country they are based in.

Post a Journal

Calculate the VAT on the service charge and post this as a journal through the Nominal Ledger.

Go to " Nominal Ledger Journal Entries".

• At "Entry mode", choose 'Multiple'.
• At "Date", enter a date for the journal.
• Enter a Nominal Centre for Reverse Charge - the journal will contra out so there will be nil effect on the accounts. Create a new centre if you do not have one set up. This could be a P&L - Overhead.
• In the Debit column enter the nett of the service charge or leave this set to 0.00
• Enter a suitable comment e.g. the supplier account and invoice number.
• Select the type of V.A.T. from the drop-down box as 'Input'.
• Select the rate to use from the drop-down box.
• The V.A.T. will be calculated and added on top of the value that you entered. Amend this if incorrect. If you did not enter a Nett amount you should enter the VAT amount as a Debit value (or Credit if you are posting a Credit note).
• Repeat the same Nominal centre on the second line of the journal.
• In the Credit column enter the nett of the service charge.
• Press <Ctrl+F6> to repeat the same comment.
• Select the type of V.A.T. from the drop-down box as 'Output'.
• Select the rate to use from the drop-down box.
• The V.A.T. will be calculated and added on top of the value that you entered. Amend this if incorrect. If you did not enter a Nett amount you should enter the VAT amount as a Credit value (or Debit if you are posting a Credit note).
• Check the totals on the right of your screen to ensure the journal balances.
• Click [Done] and [Accept] your journal.

The VAT will be included in boxes 1 and 4 of your VAT return.

See also

• Posting journals
• Posting cashbook entries
• How do I post a journal with VAT?
• How do I run the VAT 100 report?
• How do I create a nominal code?

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Keywords AND Misspellings

journal, nominal, v.a.t., reverse charge, petty cash, petty, cash, vat, hmrc, vat100, 100