3. Before you can start submitting VAT Returns under MTD you must prepare your data to ensure that the values you submit under MTD are correct. This includes:
Ensuring you’re using the correct VAT settings. SKB 36914.
Note : do not tick Enable Making Tax Digital until you are ready to make your first submission.
4. Register with HMRC for MTD SKB 42782 – must have software and data ready before you sign up as once registered your next return must be via the MTD system.
5. Tick Enable Making Tax Digital when you are ready to make your first submission
6. On the menu bar click Settings, click Company Preferences then click the VAT tab
7. Put tick in box Enable Making Tax Digital for VAT submissions.
Processing in Sage 50 for the Construction Industry in Ireland
In the construction industry in Ireland, there are two schemes run by Revenue to collect taxes
Relevant Contracts Tax (RCT) and
VAT reverse charge
For both of these schemes to apply there are specific criteria that must be present and exact definitions are available on the Revenue website. In summary, there must be a principal contractor and a subcontractor engaged in a relevant contract to carry out construction operations. Either or both of these schemes could apply to any given contract eg. a subcontractors invoice could be processed using Reverse charge VAT (T20 in Sage) and RCT at 35% could be deducted from the subcontractors payment and remitted to revenue on their behalf. Below is an overview of each:
Relevant Contracts Tax (RCT)
RCT is a withholding tax that applies to certain payments by principal contractors to subcontractors in the construction, forestry and meat-processing industries. The rates of tax that can be withheld are 0%, 20% and 35% and will depend on the subcontractor’s compliance record with revenue. All RCT transactions must be submitted through the Revenue Online System (ROS).
Value Added Tax (VAT) is normally charged by the person supplying the goods or services. However, under the VAT reverse charge scheme for construction, the person receiving the goods or services (the principal contractor) calculates VAT and pays it directly to Revenue. The principal contractor accounts for VAT as if they had supplied the service. This is known as VAT reverse charge. It applies to subcontractors involved in the construction industry only.
Sage 50
Follow instructions below to process either or both In Sage 50.
You must first find out if you will need to deduct RCT for this subcontractor and at what rate 0%, 20% or 35%. If RCT is to be deducted follow instructions below for RCT and
Find out if VAT reverse charge applies. If yes follow instructions below for VAT reverse charge.
If VAT reverse charge applies then you will receive a VAT invoice from the subcontractor showing nil VAT and a statement on it saying that VAT will be accounted for by the principal contractor. You must then use tax code T20 Reverse Charge when processing the subcontractors invoice in sage and this will post both a sales VAT and purchase VAT on the VAT return. Ensure T20 vat code is set up correctly with reference to the correct rate (usually 13.5%). VAT is applied to the full net amount of the invoice prior to any RCT deductions.
If you are the subcontractor
If VAT reverse charge applies then you should generate a VAT invoice for the principal contractor showing nil VAT and a statement on it saying that VAT will be accounted for by the principal contractor.
In Sage this sales invoice should be processed using tax code T20. This will put the net value of the sale in the Information only box at the bottom of the VAT return called – Total value of sales, excluding VAT. Using T20 on the sales invoice also prompts the sage standard invoice layouts to insert a narrative on the invoice to say that the VAT is accounted for by the customer as is the requirements under the reverse charge VAT rules.
(New Build Version – 2018 – v21.3.65.604 & 2019 – 22.0.65.604)
An issue with tax credits has been discovered which are being incorrectly allocated with Payrolls on 4weekly, Fortnightly, Bi-Monthly and Quarterly when using the Import, Batch or Automatic entry mode.
If this is the tax credits are still incorrect after the update you will need to Save the timesheets through sequentially once and this will fix the tax credits going forward.
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