For companies who will be affected by the changes to VAT in the construction sector and who use Dynamics NAV | 365 Business Central as their ERP system some reconfiguration of their system will be needed for compliance. The effect of the change is the same as the current reverse charge VAT with the EU; for transactions subject to the reverse charge rules the supplier will not charge VAT on the sale, but the purchaser must calculate the VAT on the purchase, and record it in box 1 (it’s box 2 for EU reverse charge) and reclaim it in box 4. Therefore, a new VAT Business Posting Group will need to be set up in Dynamics NAV | 365 Business Central and assigned to relevant customers and vendors. VAT Posting Setups will need to be updated with the new VAT Business and VAT Product Posting Group combinations. Lastly, the VAT Statement will need to be updated to include the new combinations.
The NAV | 365 People can help with the necessary reconfiguration of your Dynamics NAV | 365 Business Central system in order to comply with these changes. Simply contact your account manager or contact us on firstname.lastname@example.org
The HMRC’s guidance on this change to CIS VAT is as follows:
Completing your VAT Return
VAT on sales
For sales under the domestic reverse charge suppliers must not enter any output tax on sales to which the domestic reverse charge applies in box 1 of the VAT Return. The net value of the sale must be entered in box 6.
VAT on purchases
If you are purchasing a service subject to the reverse charge, you must enter the output tax on purchases the domestic reverse charge applies to in box 1 of the VAT Return. Make sure you do not enter the net value of the purchase in box 6.
You may reclaim the input tax on your domestic reverse charge purchases in box 4 subject to the normal rules, and you should enter the net value of the purchases in box 7 as normal.
More information on the HMRC’s website here.
Are you using Microsoft Dynamics NAV released in 2015 onwards or Dynamics 365 Business Central? We can show you how to use the built-in functionality.