Understanding Reverse VAT & Xero

To utilize the Reverse VAT function with your Tradify-Xero integration, you'll first need to ensure you've configured CIS & set up your DRC rates in Xero. For more information on CIS, have a look here. For more details on DRC rates in Xero, view here.

Once you've setup your DRC rates, head back into Tradify and navigate to Settings > Integrations to refresh your settings.

 

Enabling Reverse VAT for a customer in Tradify

Learn more about how Reverse VAT & Xero work together.

To enable Reverse VAT on your customers, open up their customer profile > scroll down to Financial Information and ensure Reverse VAT is set to Yes.

Reverse_VAT_1.png

 

Creating Invoices for Customers with Reverse VAT

Tax method update:

When creating a new invoice for a customer with Reverse VAT enabled, you'll notice the tax method will auto-update based on your default tax settings. If your sales default tax type is set to Exclusive, it will update to Reverse Charge - Excl. If it's set to Inclusive, it will update to Reverse Charge - Incl.

Reverse_VAT_2.png

Important note regarding VAT Inclusive invoices:

Due to current limitations in Xero's reverse VAT function, Tradify will not be able to sync invoices that are set to Reverse Charge - Incl. We have raised this issue with Xero's team but no timeframe has yet been given for a solution. If you try to post the invoice, you'll be met with the following error message: Houston we have a problem: VAT Reverse charges can only be sent to Xero as Tax Exclusive

 

Viewing the Reverse VAT breakdown:

Within the financial breakdown of the invoice, Tradify will display the Reverse VAT amount on a new row (as highlighted below).

Reverse_VAT_3.png


Viewing the customer PDF:

On the customer-facing PDF, we'll make the following note for the customer: 
Reverse Charge: Customer to pay the VAT to HMRC

Reverse_VAT_4.png

 

Creating Bills for Customers with Reverse VAT

Similar to the invoice display, Bills will auto-update the Tax type and display the reverse VAT component within the financial breakdown.

Note: Unlike invoices, there is no PDF print function available for Bills.

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