The tax point (or ‘time of supply’) for a transaction is the date the transaction takes place for VAT purposes. There are different types of tax points and you’ll need to make sure you get the right transaction on the right VAT Return.
The tax point, or ‘time of supply’, for a transaction is the date the transaction takes place for VAT purposes.
The tax point is important because it will tell you which VAT period a transaction belongs to and on which VAT return to include the transaction. The tax point must be shown on a VAT invoice.
Generally, you must pay or reclaim VAT in the VAT period in which the time of supply occurs (usually quarterly), and use the correct rate of VAT in force on that date. This means you'll need to know the time of supply/tax point for every transaction so you can put it on the right VAT Return. You cannot delay accounting for VAT until you have received payment from a customer.
The tax point will vary depending on the circumstances.
|No invoice needed||If no invoice is needed, the tax point will be the date of supply.|
|VAT invoice issued (within 14 days)||If a VAT invoice has been issued within 14 days of the supply, the tax point will be the date of the invoice.|
|VAT invoice issued (after 14 days)||If a VAT invoice has been issued 15 days or more after the date of supply, the tax point will be the date of supply.|
|Payment received or VAT invoice issued in advance||If a payment is received or a VAT invoice is issued in advance of the supply being made, the tax point will be the earlier of either the date payment is received or the invoice date.|
|Payment received in advance||If a payment is received in advance of the supply being made and a VAT invoice has yet to be issued, the tax point will be the date the payment is received.|
|Cash accounting scheme||If you use the VAT cash accounting scheme, the tax point is always the date the payment is received.|
One sale could give rise to two or more tax points.
For example, a customer may pay a deposit in advance and also make a final payment after the invoice has been received.
Assuming that the invoice is a VAT invoice and has been issued within the correct time period of 14 days after the date of supply, the tax points will be:
For example, Vicky is the owner of a hairdressers and has recently ordered a range of equipment to refurbish her salon.
Vicky paid a deposit of £300 on 2 April.
The equipment was delivered on 17 April and a VAT invoice for £2,400 (including VAT of £400) was issued by the supplier on 18 April.
Vicky paid the balance of £2,100 on 20 April.
The tax points will be :
If your business is VAT registered, then whenever you supply taxable (standard or reduced rated) goods or services to another VAT registered business you must provide a VAT invoice. A VAT registered customer needs a valid VAT invoice from their supplier in order to claim back the VAT on the goods or services which have been purchased.Read more
All VAT registered businesses must complete and submit VAT returns to Her Majesty’s Revenue and Customs (HMRC). Read more on completing your VAT return here.Read more
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