Reverse Charge VAT - Reverse charge rules

Under the reverse charge rules introduced in 2007, the purchaser of high value, portable electronic goods subject to reverse charge VAT is liable to account to HM Revenue & Customs (HMRC) for the VAT on the sale. VAT is not charged by the supplier, however their invoice must show the amount of VAT due under the reverse charge rules, and specify that the reverse charge applies and that the trading account customer is required to account for the VAT.VAT is not charged by the supplier, however their invoice must show the amount of VAT due under the reverse charge rules, and specify that the reverse charge applies and that the trading account customer is required to account for the VAT. Provided that the purchaser of the goods has correctly accounted for the VAT under the reverse charge procedure tax can still be recovered as previously. As the VAT is no longer the responsibility of the supplier they must take reasonable steps to establish the legitimacy, i.e. the VAT status of their trading account customers – they should also keep evidence of these checks for HMRC should they be required.

There is a de minimis limit of 5000, exclusive of VAT, below which the reverse charge does not apply. The de minimis limit applies per invoice, i.e. the reverse charge applies to the total value of all the specified goods on the invoice where the total of those goods is 5000 or more – the reverse charge does not apply to other goods or services on the invoice.

Where the invoice relates to a single item which is made up of components which are subject to the reverse charge, the reverse charge does not apply – VAT should be charged as normal.

Where the invoice includes an order value or settlement discount, the de minimis rules are applied to the discounted value.

Under the reverse charge rules:

  • the supplier must include the total value of a reverse charge supply in their VAT return – there is no tax to reclaim because the VAT is the responsibility of the trading account customer. The supplier must also submit to HMRC, via the Government Gateway, a reverse charge sales list (RCSL) for each of their VAT return periods. This must give details of the trading account customer, including the UK VAT registration number of the trading account customer, and transaction details involving the reverse charge. The RCSL is available if your system is set up to use Reverse Charge VAT.
  • VAT-registered trading account customers must show the amount of the reverse charge VAT on their VAT invoice and account for it on their VAT return for the period in which they received the goods.

 

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