HMRC are changing the vat method for Construction Contract work from 1st October 2019. After this date reverse vat will apply when a CIS registered company is working for another CIS registered company. Full details of the legislation can be viewed here.
The latest version of Construction Manager. Distribution Date Later than June 13th supports reverse VAT.
To set up the system up for Reverse VAT
The key setting for whether reverse VAT will apply is if the customer or the subcontractor is CIS Registered. If they are and we assume the Company using Construction Manager is also CIS registered then the customer and subcontractor default VAT rate should be changed from T1 to T20. ( T20 is the default reverse vat rate in Sage for 20% – Other reverse vat codes and rates can be set up in Sage if required ) If a subcontractor is Zero Rated then leave that the same.
Transactions
Having set the default VAT rates then the new reverse vat rate should load as the default rate for Customer and Subcontractor transaction. NOTE Reverse VAT does not apply to suppliers.
Example – Customer Application for £1000
Reverse VAT code T20 is loaded for this customer. > Zero vat shows in the application because the customer will be paying £1000 to you. The customer will pay the VAT to the HMRC.
The report layouts for Application, Certificates and Invoices have had a new section added to the which shows both Standard Rate VAT and Reverse Rate VAT Charge. This means user can use the same layout for either type of VAT.
If the user only wants to show the Reverse VAT charge simply delete the Standard Rate boxes.
ConstructionManager.net
Additional features are available in ConstructionManager.net to check for correct VAT postings. The system will warn the user if they pick a non-reverse vat rate for a customer or supplier who has been set to reverse vat.