V16.885 New time of supply rules for on-going supplies
Information Sheet 14/03, 20 October 2003
This Information Sheet provides guidance on new time of supply rules for certain on-going supplies. They were announced as part of Budget 2003 and, following a period of consultation, have effect from 1 October 2003.
1.1 What is this Information Sheet about?
Under the VAT rules all supplies have what is known as a time of supply or “tax point”. The tax point serves a number of purposes but the most common is in fixing the time at which you are required to account for VAT. There can be various tax points depending on what is being supplied.
There are special rules for some supplies which are on-going and are sometimes referred to as continuous supplies. Generally speaking a tax point for supplies of this nature only occurs when you issue a VAT invoice or receive a payment, whichever is the earlier. This Information Sheet provides further information about a new periodic tax point that has been introduced from 1 October 2003 and which will apply to some categories of on-going supply.
1.2 Why are these changes necessary?
Under the existing rules it is possible to delay the creation of a tax point and this has been exploited in some cases where supplies are made to a connected business which cannot recover all of its input tax. New rules have therefore been introduced which create a new periodic tax point which will apply in certain circumstances. In most cases it