Submit VAT returns with domestic reverse charge software

Apply domestic reverse charge VAT and wording to your invoices and bills, using Xero software. Xero does the MTD VAT return calculations for you, reducing errors and saving time. Start a free 30 day trial with Xero today.

Try Xero for free Plans from £10/month
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Supporting you with domestic reverse charge VAT

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Automate your bills

Automatically apply the domestic reverse charge to relevant products and services.

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Update your invoices

Domestic reverse charge is displayed clearly on your invoices wherever it applies.

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Submit VAT returns

Xero automatically calculates domestic reverse charges and completes MTD VAT returns.

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The finer details


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Xero automatically calculates the input and output tax on items that domestic reverse charge VAT applies to when entering your bills.

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Xero automatically shows which items are subject to domestic reverse charge, the VAT rate that applies and tells the customer they must account for the VAT.

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Once you're set up for Making Tax Digital, you can account for and submit VAT returns containing domestic reverse charge in Xero's MTD VAT returns.

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Manage domestic reverse charge with Xero

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More about domestic reverse charge for building and construction services

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What is domestic reverse charge (DRC)?

Domestic reverse charge VAT legislation changes the way CIS-registered construction businesses handle and pay VAT in the UK from 1 March 2021.

See the HMRC guidance on DRC VAT

 

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Submit domestic reverse charge invoices

Subcontractors can send domestic reverse charge invoices using Xero. Xero calculates the amount of CIS to deduct, shows which items domestic reverse charge VAT applies to, and informs the customer they must account for the VAT and at what rate.

See how to send DRC invoices as a subcontractor

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Record domestic reverse charge bills

Contractors can enter bills received from subcontractors that are subject to domestic reverse charge. Xero knows that the contractor is responsible for both input and output tax and does the VAT calculations for you.

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Setting up tax rates

The domestic reverse charge tax rates are set up in Xero ready to be added to your organisation. They can then be applied as defaults or to specific items in invoices and bills so the correct amounts are reported on the MTD VAT return.

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Submitting VAT returns

Xero automatically takes care of filling in the right boxes and completing MTD VAT returns for both the sales invoices you send and the bills you receive.

See how to submit an MTD VAT return

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Impact on your business

This change may affect your cash flow and your accounting method. We recommend you talk to your accountant or other advisor for advice.

See the HMRC guidance for construction and building services

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Find out more about DRC for construction

Find out more
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As soon as I got Xero our year-on-year profits have gone up. It’s made a huge difference in our company, just knowing what our business is actually doing.

Hitesh Kanbi, Founder, IKPE Ltd

Read Hitesh's story

Or register interest as an accountant or bookkeeper

Watch the webinar

Managing Reverse Charge VAT and CIS

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In this webinar we cover:

  • What Domestic Reverse Charge VAT is 
  • How it will affect your business if you are a Contractor or Subcontractor
  • How to prepare your business for the mandatory change when it is introduced 
  • How Xero can help manage Domestic Reverse Charge VAT and CIS

What to explore next


For all Xero features

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