The time of supply or the tax point is the date that a transaction takes place from a VAT perspective. Businesses are required to either account for VAT or recover VAT on the VAT return covering the period in which the supply takes place. There are different tax points for supplies of goods and services and this note provides an overview of the main principles.
Why are tax points important?
Businesses need to ensure that they get the tax point date correct for the following reasons (this list is not exhaustive):
- businesses are required to ensure that the correct tax point date is included on sales invoices issued
- the tax point date determines the date upon which a business can recover any input tax incurred - see the Claiming input tax guidance note
- the transaction should be included in the books and records in the period that covers the tax point date - see the VAT record keeping requirements guidance note
- the correct amount of VAT must be charged on the sale if there is a change in VAT rate at the time the transaction takes place
- if the business is nearing the VAT registration threshold it will need to understand the tax point date in order to determine the correct date it was required to be VAT registered - see the Overview - registering for VAT guidance note
- if the business is determining whether it can deregister because it will be trading below the VAT registration threshold, then it needs to understand the tax point date of supplies made so it can ascertain the date its turnover met the deregistration requirements - see the Cancelling a VAT registration number guidance note
- if the business is partly exempt, then it needs to understand the tax point rules when undertaking its partial exemption calculations - see the Partial exemption overview guidance note, and
- the business needs to ensure that the sales and purchase transactions are included on the correct VAT return. Penalties and / or interest charges can be imposed on businesses that do not account for VAT at the correct time - see Overview of the three penalties introduced from 1 April 2010
VATA 1994, s 6
SI 1995/2518, part XI