How to invoice with Domestic Reverse Charge (DRC) VAT in the UK?

Is ServiceM8 compatible with Domestic Reverse Charge (DRC) VAT in the UK?

 

If you're in the United Kingdom, you may need to generate invoices for some jobs/customers on a Domestic Reverse Charge basis i.e. where the customer is responsible for paying VAT on the goods & services youve supplied (visit the UK Governments website for more guidance on VAT and Domestic Reverse Charging).

If you have connected ServiceM8 to a Xero or QuickBooks Online account, you should be able to enable additional Domestic Reverse Charge tax rates in the tax rates settings of your Xero or QuickBooks Online account. Once enabled, these new tax rates will sync to ServiceM8.

If you have not connected ServiceM8 to a supported accounting package, go to Settings > Preferences > Tax Settings, click Add Tax Rate and create new 0% tax rates consistent with the Domestic Reverse Charge system.

 

Now, when adding labour and materials to a job, you can select and apply the new reverse charge tax rates to line items.

NOTE: changing tax rates will not automatically change an items tax-exclusive price, so take care in a scenario where you are changing VAT-inclusive line items to Domestic Reverse Charge items in a job card, as the price will need to be updated also.

Invoices where reverse charging applies require a note making it clear to the customer that domestic reverse charging applies, and that the customer is required to account for VAT.(see the UK Governments website for guidance on wording).

To achieve this, create a new Invoice template including this note, and use this template for jobs where reverse charging applies.

To demonstrate which items are subject to reverse charging, you can use an invoice template which itemises all labour and materials, and add the Item Tax Type merge field {jobMaterial.tax_rate} as a column in your invoices table formatting, to display the name of the tax rate applied next to each individual line item.

Check out the Sample Invoice Template attached below.

If you need assistance, get in touch with ServiceM8 Support at support@servicem8.com, or engage an independent ServiceM8 Partner for quote & invoice customisation services.

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