Commentary

V3.140D Tax point—supplies in the construction industry

Part V3 Supplies, acquisitions and imports

V3.140D Tax point—supplies in the construction industry

V3.140D Tax point—supplies in the construction industry

Where stage payments are made for services, or services together with goods, supplied in the course of constructing, altering, demolishing, repairing or maintaining a building or civil engineering work under a contract which provides for payment to be made periodically or from time to time, those services shall be treated as separately or successively supplied at the earlier of1:

  1.  

    (a)     the time a payment is received, and

  2.  

    (b)     the time an invoice is issued by the supplier

A tax point is not created under (b) above if the invoice in question is a self-billed invoice2.

Anti-avoidance legislation

The general rule set out above was open to abuse in that, where no payment was received and no invoice issued, no tax point was created. This loophole could be exploited by the expedient of forming a subsidiary company to construct a building on behalf of a partly exempt parent; provided no payment was made (funding being provided by alternative means) and no invoice was raised, no tax point (and therefore no irrecoverable input tax) arose. Thus the irrecoverable input tax could be deferred for a number of years.

This loophole was initially closed by an amendment3 to Regulation 93 of the General Regulations, which provided that, to the extent that a tax point had not already been created by

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