Accounting for reverse charge VAT
Domestic reverse charge is a way of accounting for VAT in the construction and other industries to help prevent fraud.
Drill through your DRC VAT calculations with Xero.

Prepare for reverse charge VAT
Domestic reverse charge is a government initiative that changes how some businesses handle and pay VAT.

Securing VAT system against fraud
Domestic reverse charge VAT was introduced to reduce opportunities for sophisticated criminal fraud.
Suppliers show DRC VAT on invoices
Subcontractors and suppliers of specified services show VAT on invoices but don’t account for it in returns.
Customers record VAT in returns
Contractors and customers who receive specified services account for VAT in MTD VAT returns.
Who domestic reverse charge affects
Domestic reverse charge (DRC) regulations apply to VAT on the supply and purchase of certain goods and services, including construction.
See which goods and services reverse charge applies to
Manage reverse charge VAT with Xero
Automatically show DRC VAT in invoices, and record it on MTD VAT returns with Xero’s reverse charge software.
Learn more about how Xero helps with domestic reverse charges
More about domestic reverse charge
CIS subcontractors don’t charge VAT to their CIS customers. Instead, their invoices need to state that the customer is responsible for VAT and show the VAT rate that applies on items.
See how to send DRC invoices as a subcontractorWhen CIS contractors get a bill from a CIS subcontractor, they need to report both the input and output VAT on that bill in their MTD VAT return.
See how Xero handles DRC in VAT returns for contractorsDomestic reverse charge VAT may influence your cash flow. Affected suppliers and subcontractors no longer get VAT payments from customers, while affected customers and contractors may see short-term cash flow benefits.
Get your questions answered in Xero’s handy free guide. Find out what domestic reverse charge VAT is, how it affects you, how to prepare for it, and how Xero can help you along the way.
Open the guide to domestic reverse charge VAT for construction
Set up for reverse charge VAT with Xero
Xero helps you comply with domestic reverse charge (DRC) regulations when you send invoices and submit VAT returns.
Add preset DRC tax rates to Xero
Activate the DRC tax rates for Xero to use in invoices and tax returns.
Show a DRC disclaimer on invoices
Xero automatically adds a disclaimer to standard invoices. Otherwise, add it manually.
Sign up for MTD for VAT
Sign up with HMRC and connect Xero to HMRC so you can file MTD VAT returns online.
Use Xero for domestic reverse charge VAT
Access Xero features for 30 days, then decide which plan best suits your business.
Explore more about domestic reverse charge
Get in-depth information about domestic reverse charge VAT at the UK government website.
Guide to reverse charge procedures
Certain VAT domestic reverse charge procedures apply when you buy or sell specific goods and services.
Find out about VAT procedures for specific goods and services
Reverse charge VAT for construction
Find out about VAT domestic reverse charge for suppliers of building and construction services.
Learn about reverse charge VAT for the construction industry
Reverse charge technical guide
Get technical information about VAT reverse charges if you buy or sell building and construction services.