Renewable Energy Certificates – VAT Reverse Charge Impact from 14 June 2019
The most recent use of the VAT Domestic Reverse Charge mechanism as a counter to missing VAT has been applied to Renewable Energy Certificates also referred to as “Guarantees of Origin”.
The effect will be that the supplier of the Certificate will no longer be allowed to charge VAT on the sale of the certificate. The VAT that is due on the supply will instead be accounted for and paid over to HMRC by the customer purchasing the Certificate. This Reverse Charge will apply to all supplies of these certificates between businesses that are VAT registered or who should be registered for VAT here in the UK.
There will be a range of issues to check not least:
- Is your customer VAT registered
- Do your sales invoices contain the correct details
- What changes to accounting processes are required
- What training for staff is needed
- How to incorporate such changes into the new Making VAT Digital reporting requirements
- Are you making an onward supply to another VAT registered business
Where you are a purchaser of such certificates and therefore have to account for the VAT as a Domestic Reverse charge on your VAT Return that will mean declaring the VAT due on the purchase in Box 1 of your VAT return and then considering whether this VAT can be fully recovered through Box 4 of your Return as Input Tax. As the Purchaser of the Certificate you do not – unlike other Reverse Charge Services – need to put the net value of the Domestic Reverse Charge into Box 6 of your VAT return. It should be entered as normal in your Box 7 figure on the Return.
There will be other issues to consider around the interaction with Accounting schemes, Self-Billing processes and the VAT Bad Debt Relief rules. Contact Centurion VAT EMAILUS@CENTURIONVAT.COM should you require assistance.