Work out the tax point for a VAT sale

The tax point is the date a sale is treated as made for VAT. You account for the VAT on the return covering that date, at the rate in force on it, whether or not the customer has paid.

Start with the basic tax point

For a service, the basic tax point is normally taken as the date all the work except invoicing is finished.

Goods

An earlier invoice or payment sets the tax point

An invoice for a zero-rated or exempt supply creates no tax point.

Invoices issued within 14 days

Deposits and advance payments

Regular and stage payments

Construction contracts with stage payments follow the same pattern. The tax point is normally the earlier of invoice and payment, and in some cases there is a final tax point when the work is completed. Retention payments have a tax point when you invoice them or are paid, whichever is first.

Put the VAT on the right return

Account for the VAT in the return period covering the tax point. You cannot wait until the customer pays, unless you use the Cash Accounting Scheme, under which you account for VAT in the period you receive payment.

When the VAT rate changes, a supply with a tax point before the change normally stays at the old rate. You may instead choose to use the rate in force at the basic tax point, for all the supplies affected or only some of them. If you have already invoiced at the old rate and the rate has fallen, correct the invoice with a credit note. Whichever route you take, report the supply on the return for the period of its normal tax point.