The reverse charge is a part of the VAT regulations and can apply when VAT-registered businesses buy from companies based outside the UK.
Put simply, if the reverse charge applies then it shifts the requirement to account for VAT from the seller to the buyer.
It therefore requires the buyer to pay the amount of VAT that would have paid if the purchase had been made in the UK.
For businesses that are VAT-registered, you need to include this reverse charge in your VAT return for the quarter and also need to include it in things such as invoices.
If you reclaim VAT, you can also reclaim the reverse charge amount – so the reverse charge is little different in reality to other VAT payments but it must be accounted for to maintain VAT compliance.
Small business guide to VAT
Managing VAT can be a pain for many small businesses - but it doesn't have to be! Everything you need to register and submit VAT and staying compliant is right here.