Domestic Reverse Charge VAT and Sage 200

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As of 1st March 2021, following the introduction of the new VAT reverse charge system, the UK’s construction industry might have to handle and pay VAT in a different way.

These changes to VAT will also impact on how many of our customers currently use their Sage 200 system.

From 1st March 2021, the domestic VAT reverse charge must be used for most supplies of building and construction services. The charge applies to standard and reduced-rate VAT services:

  • for individuals or businesses who are registered for VAT in the UK
  • reported within the Construction Industry Scheme

As this legislation has been delayed several times, Sage actually included the required changes to their software some time ago. We have already been discussing these changes with some clients, but if you would like us to contact you then please complete the enquiry form.

What is the VAT domestic reverse charge for construction services?

The VAT domestic reverse charge for building and construction services is a change in how VAT is handled for certain kinds of construction services in the UK. This also includes the building and construction materials used directly in those services. The VAT reverse charge for construction is effectively an extension of the Construction Industry Scheme (CIS).

The scheme means that those supplying construction services to a VAT-registered customer will no longer have to account for the VAT. Instead, the customer will account for the VAT. So, in simpler terms, for services they provide, sub-contractors will require the contractor employing them to handle and pay the VAT directly to HMRC.

Take a look at the GOV.uk website for more information, and advice for when you should and shouldn’t use the reverse charge.

How can I prepare for reverse VAT changes?

You’ll need to:

  • make sure your Sage system is on the correct version that can deal with the reverse charge. Your account manager will be in touch to discuss these details with you
  • check whether the reverse charge affects either your sales, purchases or both
  • contact your regular clients or suppliers to let them know
  • consider whether the change will impact your cash flow
  • make sure all your staff who are responsible for VAT accounting are familiar with the reverse charge and how it will work

The Gov.uk advises that if the VAT reverse charge does not apply you should follow the normal VAT rules. They also have flowcharts to help you decide if you need to use the reverse charge.

For more advice take a look at Sage’s FAQs


If you have any questions about anything that is mentioned in this article, please use the enquiry form or call 01332 587 515.

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