Commentary

V3.133 Tax point—receipt of a payment

Part V3 Supplies, acquisitions and imports

V3.133 Tax point—receipt of a payment

V3.133 Tax point—receipt of a payment

Introduction

Under the general rule described in V3.131 a supply of goods or services may be treated as taking place when the person making the supply receives a payment in respect of it. The supply is treated as taking place at the time when the payment is received and is treated as taking place only to the extent covered by the payment1, eg a payment of £100 in respect of a supply the consideration for which is £300 gives rise to a tax point only in respect of the £100 payment, not the full £300.

A payment in these circumstances is frequently referred to as a 'deposit', 'payment in advance', 'stage payment' or some similar description. Whatever term is applied, however, the essential elements are that2:

  1.  

    (1)     the payment is made in respect of a supply contemplated by the contract made by the parties

  2.  

    (2)     the payment is to be treated as a total or partial payment for the goods or services to be supplied under the contract

  3.  

    (3)     the payment is received by the person who is to supply the goods or services under the contract, and

  4.  

    (4)     the payment is made in advance of the time when goods are removed or made available or services are performed

The requirement in head 1 is derived from the terms of VATA 1994, s 6(4), ie that the person making the supply receives a payment in respect of it3. A payment is received in respect of a

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