The Domestic Reverse Charge (DRC) in Dext Prepare

The domestic reverse charge (DRC) is a directive wherein customers in the building and construction industry pay VAT due for a contractor’s services directly to HMRC rather than to the contractor. DRC is due to be enforced in the UK from 21 March 2021.

In Dext Prepare, you can apply DRC to contractor’s invoices by applying the relevant tax rates to them. Below you will find the following information to help you understand what DRC tax rates are, how to set them up and apply them within Dext Prepare, and how to automate them. 

Enabling DRC in your integrated software

To start, enable DRC in your integrated software:

Selecting DRC tax rates in Dext Prepare for Sage 50 & Xero

Once enabled in your integrated software, you can select DRC for your costs and sales items directly within Dext Prepare.

  1. Go to the Item details page.
  2. Go to the Tax drop down, then select the relevant DRC tax rate. 

Note: There are two different DRC rates for VAT in income and expenses, one standard, and one reduced. No need to click on anything else afterwards as Dext Prepare will automatically save the DRC tax rate you select from the drop down.


Note: You can use Supplier Rules with DRC to automatically add the relevant reverse charges with specific items.


Applying Domestic Reverse Charges for Sage Accounting

  1. Go to the Item details page.
  2. Set the Domestic Reverse Charge toggle to Yes
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DRC and the Construction Industry Scheme (CIS)

The Construction Industry Scheme (CIS) is an UK regulation, whereby contractors deduct money from a subcontractor’s payments, and pass it directly to the HMRC. DRC applies if a recipient is VAT registered, and the payments are subject to CIS. You may want to enable CIS on Dext Prepare if this applies to you.