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VAT Reverse Charge


The Reverse Charge (also know as "Tax Shift") applies when your supplier is VAT registered and based in another country, in such cases you may need to account for the VAT yourself.

When the Reverse Charge is applied you are effectively acting as the supplier and client. VAT is charged to yourself and then you also claimed back, the input and output tax therefore cancel each other out.

When to apply the Reverse Charge?


The Reverse Charge on services only applies when your supplier is situated in a different country and one or more of the services are covered by the HMRC Place of Supply Rules.

Accounting for the Reverse Charge


On a Reverse Charge supply you would first calculate the total VAT (output tax) on the invoice and then enter the amount of VAT you calculated in Box 1 and if you're entitled to reclaim this also enter the same figure in Box 4. You would then enter the total value of the supply in Box 6 and Box 7.

Place of Supply Rules


When the reverse charge is applied the rate of VAT will be assumed to be the same standard rate of VAT levied if your supplier was situated in the UK. If the invoice was issued in a foreign currency then you must account for the value of the service in GBP Sterling using a suitable rate of exchange.

You can find out more about the reverse charge and services supplied from abroad in HMRC Notice 741A. --Latest--