Before you begin, be sure that the configuration key for the United Kingdom is selected.

1. Click Basic> Setup> Addresses> Country/region .

2. Create a record for the United Kingdom and select Domesticin the Country/region typefield.

3. On the Generaltab, enter UKin the Sales taxfield and close the form.

4. Click General ledger> Setup> Sales tax> External> Sales tax reporting codes .

5. In the Report layoutfield, select English report layout.

6. In the Reporting codefield, enter the number to represent the position for reporting information on tax reports, such as 9.

7. In the Report textfield, enter text to print on the report, such as Reverse charges, and close the form.

You must set up negative and positive sales tax codes for reverse charge VAT. You will assign the negative sales tax code to an item sales tax group, and then assign that item sales tax group to the items that are subject to reverse charge VAT. For more information, see Set up and use sales tax codes.

1. Click General ledger> Setup> Sales tax> Sales tax codes .

2. Press CTRL+N, and then enter a sales tax code, such as +17.5, and a name.

3. Select the ledger posting group.

4. Press CTRL+S to save the sales tax code.

5. Click Values, enter the current tax rate as a positive number in the Valuefield, and close the form.

6. Click the Report setuptab.

7. In the EU sales listfield group, select the Not includedcheck box.

   Note
   This check box must be selected for tax codes that are set up for reverse charge VAT, because vendor invoices that are entered in Accounts payable cannot appear on the EU Sales List.

8. Enter 9in the following fields:

   • Taxable sales

   • Taxable purchases

9. Select Domesticin the Country/region typefield.

10. Press CTRL+S to save the sales tax code.

11. On the Overviewtab, press CTRL+N.

12. Enter a sales tax code for negative sales taxes, such as -17.5, and a name.

13. With the negative sales tax code selected, click the Generaltab and select the Negative sales tax percentagecheck box.

14. Click the Overviewtab.

15. Repeat steps 3 through 10 to set up the tax code to use for reverse charge items. In step 5 enter the tax amount as a negative number.

You must set up a sales tax group for sales and purchases that are subject to reverse charge VAT. For more information, see Set up and use a sales tax group.

1. Click General ledger> Setup> Sales tax> Sales tax groups .

2. Press CTRL+N and enter a name for the sales tax group, such as RC_VAT.

3. On the Generaltab, select the Reverse sales tax on cash discountcheck box.

4. On the Setuptab, select the sales tax codes that you created in the previous procedure.

You can use an existing item sales tax group for sales and purchases that are subject to reverse charge VAT.

1. Click General ledger> Setup> Sales tax> Item sales tax groups .

2. Select an item sales tax group.

3. On the Setuptab, select the sales tax codes that you created in the "Set up sales tax codes for reverse charge VAT" section.

Use this procedure to set up one or more item groups that can be assigned to items that are subject to reverse charge. Assign the item group to item records for mobile telephones, computer chips, microprocessors, or central processing units that you buy or sell for business purposes within the United Kingdom.

1. Click Inventory management> Setup> Item groups .

2. Press CTRL+N, and then enter an identifier, such as RevCharge, and a name.

3. Set up an item group to identify goods for which reverse charges are applicable. For more information, see About item groupsand Item group (form).

4. Click Inventory management> Common Forms> Item details .

5. Select an item that is subject to reverse charge and click the Generaltab.

6. In the Item groupfield, select the item group that you created in step 2.

Use this procedure to set up the minimum amount for an invoice or line item that is subject to reverse charge VAT, and to specify other information that is printed on invoices and reports.

Note
The threshold amount is set by the United Kingdom government. For more information, contact your tax accountant.

1. Click General ledger> Setup> Parameters .

2. Click the Reverse chargetab.

3. In the Invoice thresholdfield group, you can select the Invoice level thresholdcheck box and enter the minimum amount for an invoice to be considered for reverse charge VAT, such as 5000. Reverse charge VAT applies to the value of individual line items that do not meet the threshold amount, but whose total value on the invoice is equal to or exceeds the threshold amount.

4. In the Item line thresholdfield group, you can select the Item line thresholdcheck box for individual item lines to be considered for reverse charge VAT.

5. In the Item groupfield, select the item group that you created in the "Set up inventory information for reverse charge VAT" section and enter the minimum amount for an invoice line to be considered for reverse charge VAT, such as 5000. Reverse charge VAT applies to the value of individual line items that are equal to or exceed the threshold amount.

6. In the Purchase order sales tax groupfield, select the sales tax group that you created in the "Set up a sales tax group for reverse charge VAT" section.

7. In the Sales order sales tax groupfield, select the sales tax group that you created in the "Set up a sales tax group for reverse charge VAT" section.

8. In the Contact detailsfield group, enter contact information to be printed on the Reverse charge sales listreport that is submitted to the tax authority.

9. In the Invoice textfield group, enter text to be printed on invoices, such as Customer to pay VAT to HMRC. An asterisk is printed next to each invoice line that contains an item that is subject to reverse charge, and the text you enter here is printed at the bottom of the invoice.

Use this procedure to enter your company's VAT number for use with reverse charge VAT.

1. Click Basic> Setup> Company information .

2. Enter a postal code and select UKin the Country/regionfield.

3. On the Contact informationtab, enter your company's VAT number in the Tax exempt numberfield.

Use this procedure to set up reverse charge VAT for a customer that purchases certain goods for a business purpose. If you do not specify a VAT number for the customer, the standard VAT rate is charged. For more information, see Attach a tax exempt number to a customer.

1. Click Accounts receivable> Common Forms> Customer Details .

2. Select the customer account.

3. On the Setuptab, enter the customer's VAT registration number in the Tax exempt numberfield.

4. Repeat steps 2 and 3 for the remaining customers that are subject to reverse charge VAT.

Use this procedure to set up reverse charge VAT for a vendor from which you purchase certain goods for a business purpose. If you do not specify a VAT number for the vendor, the standard VAT rate is charged.

1. Click Accounts payable> Common Forms> Vendor Details .

2. Select the vendor account.

3. Enter the vendor's VAT registration number in the Tax exempt numberfield.

4. Repeat steps 2 and 3 for the remaining vendors that are subject to reverse charge VAT.