VAT – Time of supply
The rules on the time of a supply for VAT are important and they determine when a supply is made and the rules that would apply and the period into which the supply falls. This in turn will impact on the payment of VAT.
There is one basic rule for goods and another for services. Broadly the basic rule for goods is that the supply will take place when the goods are made available to the customer. This however is not the case if the goods are either removed from the UK or are made available on a sale or return basis. Broadly in these cases the time of the supply will be when the goods are either removed or are sold or 12 months after they were made available (whichever is the sooner). The basic rule for services is that the supply will take place when the services are performed.
These basic rules are however subject to a number of exceptions. If a VAT invoice is raised or a payment received earlier than under the basic rule then this will be the time of supply (but this does not apply to a supply made under a sale or return agreement etc). Also if a VAT invoice is raised within 14 days of the basic rule date then this will automatically become the time of supply unless the supplier has agreed with HMRC to disapply this rule. This rule automatically overrides the basic rule date but not the advance payment date nor the advance invoice date. Generally by agreement with HMRC the 14 days may be changed.
There are also a number of other exceptions to the basic rule. If, for example, the supply involves the removal of goods from the UK and the recipient is liable to pay VAT locally under rules similar to the acquisition VAT rules that apply to the UK then the time of supply will be the earlier of the 15th of the month following removal or when a VAT invoice is raised. Also by agreement with HMRC the time of supply may be based on the working period to facilitate invoicing but this does not override the advance payment or advance VAT invoice rule. HMRC may make changes to the time of supply rules in certain circumstances and different time of supply rules apply to appropriations of business goods for private use etc.
It is important to get the time of supply right as it can easily lead to an under declaration of VAT in a particular period and penalties. Also when VAT rules change then it will be important to know which rules apply and the time of supply will play an important role. The above is a good general overview of the time of supply rules but the details of any particular supply will play an important role in determining the time of supply and advice should always be sought if uncertain.