What is reverse-charge VAT?

Normally the supplier charges VAT to the customer and pays it over. With a shift it works differently: the supplier charges no VAT, and the buyer reports the VAT in their own return and, if entitled, reclaims it in the same return. For the buyer the net cost is usually nil, but the books have to show both sides.

An arrangement like this applies to certain services and supplies between businesses, for instance work across a border or in particular sectors. The exact case decides whether the shift applies, and that is something you confirm with your bookkeeper or accountant, not something to decide by feel.

What goes wrong? A seller charges VAT by mistake, or fails to when it should have. The buyer posts the purchase without the shifted VAT, so the VAT return is wrong. Or the note on the invoice is missing. Errors like these often surface only months later.

So look at the VAT code on the posting, at the wording on the sales invoice and at the customer's VAT number. For supplies within the EU, the intra-community supply comes into it too, and sometimes an EC Sales List.

For situations that repeat, agree one fixed code to use, so that not every colleague has to guess. That saves argument and correction later. Record that agreement for new colleagues too, for instance in a short working instruction for purchase and sales administration. That keeps the treatment the same, even when someone is on holiday or the team changes.