Domestic Reverse Charge: Digital links for Xero, QuickBooks and Sage users

The Domestic Reverse Charge (DRC) was introduced on 1 March 2021. This new reverse charge is the latest initiative to combat missing trader or carousel fraud that first appeared in relation to precious metals, computer chips and mobile phones. The DRC affects businesses that:

  • Buy or sell services that are ‘specified services’ that are reported within the Construction Industry Scheme (CIS)
  • The supplier and the recipient are both registered for VAT in the UK
  • The supply is standard rated or reduced rated
  • The supply is not to the end user or an intermediary

Supplies of zero rated construction services are not included within the DRC. For example, construction services on a new build house will be invoiced as normal under the current regulations.

Impact on the VAT return – suppliers

Under the DRC, suppliers that provide a specified service do not charge VAT on the invoice raised to the customer.

When the supplier completes the VAT return:

  • The net value of the sales subject to DRC (including credit notes) will be included in Box 6 of the VAT return as normal
  • No output tax will be declared in Box 1, as this output tax is accounted for by the customer

Output tax on services that are not included within the DRC will be declared on the VAT return as usual.

Impact on the VAT return – customers

Customers who receive a DRC invoice will account for the suppliers output tax in box 1 of the VAT return. The same amount of VAT is reclaimed as input on the VAT return, which creates a nil net result.

When completing the VAT return, Xero & Quickbooks will automatically:

  • Enter the tax on purchases subject to DRC, including any reductions due to credit notes, in Box 1 of the return
  • Reclaim the input tax on the DRC purchases in Box 4, subject to the normal rules. This includes any reductions due to credit notes
  • Enter the net value of the purchases under DRC (including credit notes) in Box 7

Please see the next page for details on how each software will cope with the changes and how to apply these.

Domestic Reverse Charge: Digital links for Xero, QuickBooks and Sage users

Xero users

To support DRC, Xero has specific tax rates to use on invoices and bills in order to report the correct amounts on the MTD VAT Return. The non-MTD VAT Return in Xero doesn’t support the DRC, so you need to set up MTD for VAT if your organisation doesn’t currently use it.

The DRC tax rates are:

  • Domestic Reverse Charge @ 20% (VAT on Expenses)
  • Domestic Reverse Charge @ 20% (VAT on Income)
  • Domestic Reverse Charge @ 5% (VAT on Expenses)
  • Domestic Reverse Charge @ 5% (VAT on Income)

The VAT Cash Accounting Scheme cannot be used where services are subject to the reverse charge, so DRC transactions are always reported on an accrual basis.

The Flat Rate VAT report in Xero does not support DRC, so transactions need to be manually added using the reverse charge provisions. Contact us for support on how to record DRC transactions under the Flat Rate VAT Scheme in Xero. Our contact details are set out at the end of this article.

How to add the DRC tax rates

  1. In the Accounting menu, select Advanced
  2. Click Tax rates
  3. Click Add Domestic Reverse Charge Tax Rates
  4. Click Add Domestic Reverse Charge Tax Rates to confirm


From 1 March 2021 QuickBooks will have two new VAT codes (20% and 5%) that clients will be able to use to account for the VAT reverse charge. Once the code has been selected and the transaction is saved, QuickBooks will automatically account for the reverse charge and the VAT will be reflected on your VAT return; you do not need to amend or adjust your return.

If you are an existing client and have enabled VAT and CIS, then you do not need to set up anything. You will only need to enable and select the VAT code to apply it to invoices or bills.

How to add the DRC Tax codes

The codes will be available for activation on 1 March 2021 onwards.

First make sure VAT is set up and CIS is turned on in QuickBooks. Then go to your Taxes page and follow these steps to activate the code in QuickBooks:

  1. Go to Edit VAT
  2. Select Edit Rates
  3. Select the gear icon above VAT codes
  4. Click Include Inactive
  5. Use the toggle on the codes that you want to activate in QuickBooks

How to turn on CIS

  1. Click the Gear icon > Company Settings (or Account and Settings depending on what you see)
  2. Click Advanced
  3. Select Construction Industry Scheme (CIS)
  4. Enter your info

Sage users

Sage have now updated their software and added two new tax codes T21 and T26 but these are only being added to Sage 50cloud Accounts v26 and higher. If you are on one of these and don’t have the new codes check to see if there are any updates available. If you are on lower version than v26 the new codes will need to be created manually.

New tax codes

Two new tax codes have been created in Sage 50cloud Accounts v26 and above:

  • T21 to be used where CIS Reverse Charge Standard Rate applies
  • T26 to be used where CIS Reverse Charge Reduced Rate applies

These tax codes can be used by both the subcontractor and the main contractor and ensures that the VAT Return is updated correctly. These must be used for both your sales and purchase transactions, where domestic reverse charge applies. If tax code T21 or T26 is already in use, the next available tax code is used.

What if I do not use Sage 50cloud Accounts v26 or above?

If you do not use Sage 50cloud Accounts, you’ll need to manually create the reverse charge tax codes. For more information about creating tax codes please contact us.

  • Your new standard rate reverse charge tax code should be linked to T1 and flagged as Reverse Charge
  • Your new reduced rate reverse charge tax code should be linked to T5 and flagged as Reverse Charge

Further information

Our fact sheet sets out detailed information regarding the domestic reverse charge.

You can also watch a recording of our recent webinar which provides further explanation and guidance.

For advice on the Domestic Reverse Charge please contact:

Jonathan Main, Indirect Tax and VAT Partner, or 01772 821 021

Carolyn O’Shea, Indirect Tax and VAT Manager, or 01772 821 021

For advice on your accounting software please contact:

Digital Solutions Team, or 01772 821 021

Taking advantage of digital solutions

In this insight post we set out ways to help you get the most out of your current bookkeeping software to help improve accuracy and efficiency.

Receipt Bank

Are you still typing in supplier invoices into your accounting system? Stop! ReceiptBank links with the main cloud accounting software products and can also link in with Sage 50C.

Uploading receipts via ReceiptBank saves time and reduces the risk of making errors on input. In addition, the software can be used to calculate staff/director expenses. Snap each receipt as you get then instead of saving them in your wallet, purse or handbag and delaying the task for a later date.

Sage 50 reporting

If you are creating board reports manually from Sage 50, get in touch as we can set up one click reporting into Excel for you. We can work with you to design a report pack with all the information you need to share with your fellow directors, or whoever needs updates, including information of top customers, geographical sales break down and profitability from month to month.

Our top tips for 2021

Review your bookkeeping processes and look into creating “App Stacks”. There are lots of apps linking to Cloud accounting software which will help you enhance your internal processes and the customer experience.  Examples include customer relationship management, inventory systems, people management, project management and credit control.

Make sure all areas of your office are as cloud based as possible to allow for remote working, ensure it works effectively by having the right technology in place for you and your team.

2021 is likely to be very volatile and businesses need to be as up to date as possible with their finances so they can react quickly to deal with whatever hits their sector, business or family as quickly as possible.

Sign up to our MHA digital newsletter so you keep up to date with changes to software and new recommended apps.

Speak to your accountant! We want to help you be as efficient as possible so you can spend more time on what you do best – running your business

What we can expect from digital accounting in 2021?

From a cloud accounting view, I think we will see more advancements within software with regards to reporting and collating of data. There will be more changes to the VAT areas following Brexit and the construction industry domestic reverse charge.

The beauty of the cloud accounting software is that you get all the upgrades for no additionalcost, and without doing anything. The amount of apps linking with Xero and Quickbooks will continue to grow and existing ones will develop. In 2021 the digital links for Making Tax Digital (for VAT) becomes compulsory so businesses need to be review their bookkeeping processes to make sure they are complying with the rules.

Contact us

Please get in touch with Judith Dugdale, Corporate Services Director and Head of Digital Solutions, if you need support, or alternatively contact us here.

Using Personal Data & Data Protection after 1 January 2021

Regardless of whether the UK and the EU agree a trade deal, if a business needs to continue to receive personal data from the EU for business use, they may need to take action on data protection.

If no UK data adequacy decisions have been made by the end of the transition period, UK businesses will need to map out data flows with their EU partners and put alternative transfer mechanisms in place to continue to lawfully receive personal data from the EU. Most commonly, this will require standard contractual clauses being put in place.

Businesses will also need to familiarise themselves with the data protection provisions of the Withdrawal Agreement, to ensure they are in a position to comply.

Refer to the Information Commissioner’s Office (ICO) website as they have detailed guidance on any additional steps businesses may need to take and an interactive Standard Contractual Clauses tool to use.

Further guidance is available online by searching for ‘using personal data from 2021’ on the GOV.UK website.

This update originally appeared on the website of our colleagues at MHA Monahans.

Can I claim Patent Box relief?

Since 1 April 2013, certain income derived from patents and other qualifying intellectual property has been eligible for a reduced rate of corporation tax, at 10%.  Given the main Corporation Tax rate has been set at 19% for the foreseeable future, this is a generous relief for those companies with profits derived from qualifying Intellectual Property (IP).  The rules for the Patent Box regime were tightened following international scrutiny and as a result new claimants (those applying for accounting periods beginning on or after 1 July 2016) must apply these new more complex rules.

Who can claim?

Patent Box relief is available to UK registered companies which are liable to Corporation Tax.  The company must hold the qualifying IP and must have carried out qualifying development on the qualifying IP. 

Patent Box relief applies to patents granted by the UK Intellectual Property Office (IPO), the European Patent Office or by the national IPO of certain European countries.

Making a claim

To claim Patent Box relief a company must actively elect into the regime by notifying HMRC in writing. 

To arrive at the 10% headline rate, it is necessary to carry out a multi-step calculation which results in a patent box deduction.  This is deducted from the company’s taxable profits so that the profit on the qualifying IP only is taxed at an effective 10%.

Claiming Patent Box relief is not a straightforward exercise and an election into the regime should be considered carefully to ensure the patent holder will benefit from the work involved in calculating the relief. 

It is also important to consider the timing of an election as this could affect the amount of relief available – in certain circumstances it could be beneficial to defer election, particularly in the early years where the patented item might not realise a profit.

Related article

Need support?

Contact our tax team for advice

5 simple tips to protect your business against fraud

In these uncertain times, businesses are combatting an increased amount of fraud.

The Financial Cost of Fraud 2019 report published by the Centre for Counter Fraud Studies at the University of Portsmouth suggested that fraud costs UK businesses £130 billion each year.

Throughout recent months, there have been widespread reports of an uptick in fraudulent websites, charity scams and fake emails purporting to be from banks. This increase in fraudulent activity is being driven by opportunists who are attempting to take advantage of the confusion and change of circumstances resulting from the current global pandemic.

Here we’ve provided some tips to protect your business against the costly effects of fraud.

1.Risk assessment

In order to protect against fraud, businesses should carry out a risk assessment. This should include an assessment of any IT risk that could arise through remote working. Cyber security measures should be put in place including firewalls, anti-malware and anti-virus software. This software should be kept up to date.

2.Staff training

All staff should be trained on how to spot fraudulent emails and should be provided with clear guidelines on what to do if they spot a fraudulent email. For example, check email addresses to see if they look suspicious, report the suspicious email to the IT manager or delete the email.

3.Regular audits

On the financial side, regular internal and external audits should be undertaken. Two signatures or authorisations should be required to sign off on payments from the business.

Access to the firm’s bank accounts, online banking facilities and payment systems should be restricted to a limited number of people. An authorisation or approval process should be put in place for all payments over a certain amount.

4.Password protect devices

Computers, company mobiles, phones and devices should all be password protected. All staff should be trained on how to create a secure password and a process should be put in place which means that all passwords are updated on a regular basis.

5.Insurance policies

Even if you implement these measures, your business could still be the victim of fraud or cyber crime. Make sure that you have appropriate insurance policies in place so that your business is protected against any losses incurred from crimes such as fraud.

Contact us

Please get in touch with Karen Hain, Partner if you need support, or alternatively contact us here.

This update originally appeared on the website of our colleagues at MHA Carpenter Box.

How to improve your Search Engine Optimisation (SEO)

As many businesses are seeing an increase in online trading, our friends at Epic New Media have created an update on how to improve your SEO performance.

They set out an SEO Audit Checklist below which
covers the basic information that you need to look at to ensure that your
website appears in Google’s search results and is relevant for target keywords.

Action Why How Priority
Create Sitemap.xml Sends good trust signals to Google and potential website visitors There are WordPress plugins (like Yoast and RankMath) will create a
sitemap. This will be a feature in most CMS.
Robots.txt File Gives search engines instructions on how to crawl the website This action will probably require the time of a person who can
navigate around the site files easily, but it is a straight forward task. A
robots.txt file needs creating in the root directory.
Set Up Google Analytics Allows you to accurately monitor the performance of your website Google has a useful guide High
Set Up Google Search Console Allows you to see how Google is crawling your website Google has a useful guide High
Submit the Sitemap.xml via Google Search Console To prompt Google to crawl your site Find your sitemap URL (typical or > login to Google Search Console >
click Sitemaps > Enter your sitemap URL and click submit
Keyword Optimised H1 Tags Ensures that pages are relevant for target keywords Find your sitemap URL (typical or > login to Google Search Console >
click Sitemaps > Enter your sitemap URL and click submit
Keyword Optimised Title Tags Ensures that pages are relevant for target keywords Add target keywords to your web pages’ title tags. The area that you
can update a page’s title tag should already be in place (Yoast or RankMath
can be used on WordPress). The title tag and the h1 tag should target the
same primary keyword
Review Page Loading Speed A slow loading page harms user experience and it also slows down
search engines when crawling the website
Check each page template of your site (homepage, category, service, product, blog, etc.) using a tool such as Pingdom ( and Google PageSpeed Insights ( High
URLs Use HTTPS rather HTTP Makes the website more security Your hosting providers will be able to implement this High
Ensure that the Site is Mobile-Friendly Your site will be penalised by Google if your site doesn’t work
correctly on mobile devices
Test using Google’s Mobile-Friendly Test High
Target Keyword Mentioned in the Page’s URL Improves keyword relevancy for the page Update the URL of a page to contain the primary target keyword and
make sure you set up redirects so don’t create any broken pages or lose
keyword rankings
Fix Broken Links Improves user experience Scan your website with auditing tools such as Ahrefs, SEMRush,
Screaming Frog. These tools will provide you with a report that shows broken
links and other issues with your website.
Add Sitemap to Robots.txt File Enables search engines to find the sitemap.xml easily Find your sitemap URL (typical or and add it to your Robots.txt file.
Set Up Goal Tracking in Google Analytics You can see how many enquiries, potential leads and/or sales your
website is generating
Gogole has a guideful guide Medium
Create Google My Business Listing Sends good trust signals to Google and potential website visitors Create a Google My Business listing here Medium
Meta Descriptions Sends good trust signals to Google and potential website visitors The area that you can update a page’s meta description should already
be in place (Yoast or RankMath can be used on WordPress).
Landing Pages Featured in the Top Navigation Allows search engines to crawl and find pages easily Depends on the flexibility of the CMS. This can be implemented in
WordPress in the Menu section. This may require the time of a developer.
Key Landing Pages Featured in the Footer Allows search engines to crawl and find pages easily Depends on the flexibility of the CMS. This can be implemented in
WordPress in the Menu section. This may require the time of a developer.
Internal Links in the Content to Relevant Pages Improves keyword relevancy for target page and improve user experience Review your content and add internal links to relevant pages. Medium
Resolve 404 Errors in Google Search Console Remove broken pages from search engine results Review your content and add internal links to relevant pages. Medium
Keyword Optimised H2 Tag Enables pages to rank for long-tail keywords Adding secondary/long-tail keywords as h2 tags on pages. Medium
Regularly Update the Blog Gives search engines a reason to crawl the site again and allows you
to target long-tail keywords.
Hopefully, you should have a Blog or News section built into the site,
otherwise, you will require the time of a developer.
Alt Tags Describes what’s on the image and the function of the image on the
There should be an option your CMS to add Alt tags for images in the
Media/Image Library or when you add them to the page.

This article was written by Epic New Media. If you would like further information about the content within this update then please contact them on 0800 464 0168.

Nitro – we have switched!

We are now using Nitro to create, convert, edit, sign, and share PDFs with ease and efficiency. This will be our default setting for signing and sharing. Nitro is a secure network which is fully compliant with GDPR and is the perfect tool for sharing data quickly and efficiently.

Below are some of the ways we believe Nitro will allow both ourselves and clients to minimise admin time and have the ability to access documents to sign whenever and wherever is convenient to them:

Lower risk

Given that electronic signatures are legally binding, using Nitro will improve security and compliance with audit trails and electronic records. Nitro is fully GDPR compliant and we have taken additional measures to ensure business sensitive data is protected by implementing two factor password authentication

Save time

By Digitizing the process, you’ll be saving time on document returns, with a simpler way to sign documents that is available wherever you are.

Improve relationships

By offering an easier, more modern way to complete common workflows, our clients and employees can enjoy a better, more efficient experience from start to finish.

Reduce unnecessary waste

In an environmentally conscious world, by going paperless you can save time, money and physical resources, with the bonus of saving the planet at the same time.

Click here for more information on how it works, or contact the Business Administration Managers with any queries

For more information on Nitro please take a look at their website –

Our annual CSR results for 2019 are in!

We have had another fantastic year at MHA Moore & Smalley. After sending out the survey to over 4200 clients, we have received an overall satisfaction score of 96%, a 1% increase on last years, already great, result.

This score is based on clients’ answers in response to questions that rate us in terms of communication, technical ability, commitment to each individual business, and our CRM.

Thank you to everyone who got involved. Delivering outstanding client service is at the heart of everything we do. Therefore it is wonderful to know that we are delivering on our mission, vision and values, as we continue to improve and strive to be the best we can be.

Take a look at this year’s results below