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Which transaction should go on which VAT return?

Which transaction should go on which VAT return?

A 'tax point' or the 'time of supply' is when a transaction - a sale or other supply of goods or services - takes place for VAT purposes.

The tax point determines the 'tax period' when VAT is payable and when VAT can be reclaimed. Generally, you must pay or reclaim VAT in the 'tax period' in which the tax point occurs.

The time when a tax point occurs can depend on the type of transaction. There are some special situations when the tax point can occur at a different time than you might think.

This guide explains VAT tax points and when they occur. It explains the difference between basic tax points and actual tax points. It also includes links to more information about tax points in certain special situations.

On this page:

Tax points and how they affect paying and reclaiming VAT
Basic tax points and actual tax points
Basic tax points for goods and services
Actual tax points
Back to basics and applying for extensions
Time limits for issuing VAT invoices after a tax point occurs
Not creating a tax point before it is necessary to do so
Place of supply
Finding tax points - specific situations and sectors
More useful links

Tax points and how they affect paying and reclaiming VAT

A 'tax point' or the 'time of supply' is when a transaction- a sale or other supply of goods or services - takes place for VAT purposes.

The tax point determines the 'tax period' when VAT is payable to HM Revenue & Customs (HMRC) by sellers and when VAT can be reclaimed from HMRC by buyers. Generally, you must pay or reclaim VAT in the 'tax period' (generally quarterly) in which the tax point occurs and use the correct rate of VAT in force at that time.

To issue a VAT invoice you must actually send or give it to your customer. It's not enough to just prepare it.

Basic tax points and actual tax points

The tax point is usually - but not always - either the invoice date or the payment date, whichever comes first.

Most tax points are 'basic tax points'. But basic tax points can be overridden by 'actual tax points', which may occur before or after a basic tax point.

You'll need to know the right tax point to use for each transaction. If you use the wrong tax point you could be liable to pay VAT sooner than you think. Or you might have to claim back VAT later than you'd thought you could.

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Basic tax points for goods and services

Basic tax points - goods

The basic tax point for goods that are sold otherwise supplied is generally the date when:

the seller sends the goods to the customer
the customer collects the goods from the seller
the goods become available for the customer to use - for example, if the seller's building something on the customer's premises

Basic tax points - services

The basic tax point for services that are provided is generally the date when:

the service is carried out
all the work - except invoicing - is finished

If a service is provided on an ongoing basis - for example a regular cleaning service - a tax point arises each time the service provider issues an invoice or receives a payment - whichever happens first.

If payments are due at regular intervals - perhaps by direct debit - for a service you provide, you can issue a VAT invoice at the start of any period of up to a year as long as there's more than one payment due in the period. This one invoice can cover all the payments due in the period.

If you do this, you should include the following information about each payment on the invoice:

the amount excluding VAT
the date when each payment is due
the rate of VAT that applies
the amount of VAT that is payable

If you decide to issue an invoice at the start of a period, you don't have to account for VAT on any payment until either the date when the payment is due or the date you receive it - whichever happens first.

Similarly, if you buy services on an ongoing basis, you must not claim back the VAT shown on the invoice until the date when the payment is due or the date you make a payment - whichever comes first.

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Actual tax points

An actual tax point occurs when something happens at a specified time or a time period elapses. An actual tax point can occur before or after a basic tax point.

The actual tax point overrides the basic tax point to become the time you are liable to pay or reclaim VAT.

When an actual tax point occurs before the basic tax point

An actual tax point can occur before the basic tax point when, for example:

the seller issues a VAT invoice before the basic tax point occurs
the seller receives payment before they issue an invoice

When an actual tax point occurs after the basic tax point

An actual tax point can occur after the basic tax point when, for example:

the seller issues a VAT invoice up to 14 days after the basic tax point
the seller issues a VAT invoice later than 14 days after the basic tax point, but we've allowed them to extend the 14 day limit

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Back to basics and applying for extensions

If you issue a VAT invoice more than 14 days after the basic tax point, the tax point is normally the basic tax point - not the date of the invoice. You must then account for the VAT at the earlier time of the basic tax point.

You may be able to get the normal 14 day period extended according to your business circumstances. For example you only issue invoices monthly, an extension would allow you to issue invoices after the end of the month in which you supplied goods or services. You could then, for example, agree the last day of the month - or perhaps the invoice date - as the tax point.

You'll need to agree any extension with us first. To get an extension, apply in writing to HMRC giving your reasons. You'll need to say in your application whether you want to take the last day of the month as the tax point or the date when you issue each VAT invoice.

Whichever system you use, you must use it consistently.

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Time limits for issuing VAT invoices after a tax point occurs

You must generally issue an invoice within 30 days of a basic or actual tax point arising.

Find out more about issuing VAT invoices

Not creating a tax point before it is necessary to do so

If you need to issue a sales document for goods or services you haven't supplied yet, you can issue a 'pro forma' invoice or a similar request for payment to offer goods or services to customers.

If you use pro forma invoices you should clearly mark them with the words 'This is not a VAT invoice'.

If your would-be customer accepts the goods or services you're offering them and if you actually supply them a tax point arises and you'll need to issue a VAT invoice the sooner of 14 days after delivery or when payment is received.

You mustn't try to use pro forma invoices to avoid paying VAT.

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Place of supply

If you do business internationally you'll need to know where your transaction takes place for VAT purposes, eg in the UK or outside the UK. This is called the 'place of supply' for VAT purposes.

Find information on the place of supply for VAT purposes

Finding tax points - specific situations and sectors

There are different rules for working out when the tax point occurs in certain specific situations. Sometimes these rules apply to certain types of goods or services, and sometimes they apply to particular types of business.

You may also be able to get our approval to work out the tax point on your sales in your particular business in your own particular way.

Particular tax point rules apply to the following: