What is the Domestic Reverse Charge?
The Domestic Reverse Charge (DRC) is a VAT procedure where the buyer, not the supplier, accounts for VAT.
It applies to certain goods and services – most commonly in construction and subcontracting – and requirements depend on the tax authority where you’re registered.

United Kingdom

1. How to set up Domestic Reverse Charge for the UK?

  • Legal Entity Setup:
    Ensure the legal entity has United Kingdom selected as both the Tax Authority and Country.

  • Supplier Setup:
    Confirm the supplier is set to United Kingdom for both Tax Authority and Country.
    Tick the Domestic Reverse Charge checkbox.

2. How to process a Domestic Reverse Charge document in the UK?

  • Create a Purchase Order (PO) or Purchase Invoice (PIN) using a UK supplier and legal entity

  • The “Apply Domestic Reverse Charge” checkbox will appear in the header and is ticked by default (you can untick it if necessary).
  • DRC applies to both materials and subcontracting services.
  • Use the Standard VAT Tax Band for both materials and subcontractor costs.
    (Note: The tax code behind the scenes will differ from the normal standard-rated tax.)
  • For subcontractor invoices, VAT will be reflected in both the output and input boxes on the VAT return.
  • The Gross Total on the PO/PIN will equal the Net Total due to the reverse charge mechanism.


Ireland

1. How to set up Domestic Reverse Charge for Ireland?

  • Legal Entity Setup:
    Ensure the legal entity has Ireland selected as both the Tax Authority and Country.

  • Supplier Setup:
    Confirm the supplier is set to Ireland for both Tax Authority and Country.
    Tick the Domestic Reverse Charge checkbox.

2. How to process a Domestic Reverse Charge document in Ireland?

  • Create a PO or PIN using an Irish supplier and legal entity.

  • The “Apply Domestic Reverse Charge” checkbox will appear and is ticked by default.
  • Important: In Ireland, DRC applies only to subcontracting services, not materials.
  • To avoid errors, some clients use separate suppliers for services and materials.
  • Use the Standard VAT Tax Band for services.
    (Materials should be treated as normal and not included in DRC.)
  • VAT for subcontract services will be added to both output and input sides of the VAT return.
  • The Gross Total on the PO/PIN will equal the Net Total due to the reverse charge.