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Domestic Reverse Charge (DRC)

Are you a VAT-registered business in the UK construction industry? If so, Domestic Reverse Charge (DRC) is an important topic you need to be aware of! Don’t worry, we're here to help!

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What You Need to Know about Domestic Reverse Charge

Domestic Reverse Charge is a VAT mechanism introduced by HMRC to combat VAT fraud within the construction sector. It shifts the responsibility for paying VAT from the supplier to the customer in certain transactions, affecting how VAT is accounted for in the supply chain.


Under the Domestic Reverse Charge (DRC) rules, only services falling within the scope of CIS are affected. This implies that DRC is applicable to specific construction services, including building construction, painting, decorating, heating installation, and more.

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The Change

Until March 2021

A subcontractor (builder) providing services and building materials to a contractor (construction firm) is required to include VAT charges and report the VAT to HMRC through their VAT return submission.

After March 2021

When a subcontractor (builder) provides services to a contractor (construction firm), the contractor is responsible for declaring the VAT due on their VAT return and reclaiming it as per the normal VAT rules.

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Showing Domestic Reverse Charge in VAT Return

If you buy services subject to the reverse charge, you must handle the VAT accounting in the following manner:

Box 1: Enter the VAT charged on reverse charge purchases as output tax.
Box 4: If you are eligible to claim VAT on reverse charge purchases, enter the same amount in Box 4.

Suppliers who provide services under the reverse charge should not include any output VAT on sales in Box 1. Instead, they need to enter the net sales amount in Box 6 of the VAT return.

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Our experienced professionals possess in-depth knowledge of VAT regulations and filing requirements, staying updated to ensure accurate and compliant VAT returns.

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Experience seamless VAT compliance with us. Our expert team guarantees efficiency, accuracy, and compliance every step of the way. Trust us to handle your VAT return with precision and professionalism, while you focus on your business's success.

Initial Discovery Call

We conduct an initial discovery call to gather relevant information about your business ensuring a clear understanding of your specific VAT return requirements.

Data Collection

We collect all necessary financial data for your VAT return, including sales invoices, purchase receipts, and relevant VAT records.

VAT Calculation and Reporting

We calculate your VAT liability while ensuring proper accounting for eligible deductions, and allowances, in the preparation of your VAT return.

Review and Finalisation

We conduct a thorough review to ensure compliance with HMRC guidelines, addressing any potential issues for your VAT return.

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Upon your review and approval, we submit VAT return on your behalf, ensuring that your VAT return is filed within the specified deadline.

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Our commitment goes beyond just preparing and filing VAT return. We provide ongoing support, including tax planning and addressing VAT queries throughout the year.

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