Procurement cards

By Tolley

The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Procurement cards
  • What are procurement cards?
  • Time of supply (tax point)
  • VAT accounting requirements

This guidance note provides an overview of the procedure that must be used by businesses using and accepting procurement or corporate purchasing cards.

VAT Notice 701/48: corporate purchasing cards ; VATTOS6410
What are procurement cards?

These are also known as corporate purchasing cards and enable businesses to pay for business purchases electronically. The use of these types of cards reduces the paperwork associated with business purchases. Cards issued by UK organisations are designed to be compatible with the UK VAT accounting requirements.

Businesses that sell goods and accept procurement cards should not normally issue a VAT invoice to customers using the card. The VAT invoice is issued by the card company that issued the card to the customer. The invoice will be issued using the information transmitted through the procurement card system.

The supplier will need to be recognised as a merchant on the procurement card system in order to be able to accept this method of payment. However, it is possible that the transaction could be routed via a recognised intermediary. These intermediaries enable merchants who are not recognised on the banking system to issue invoices and be paid via the procurement card system when they accept a procurement card. HMRC will regard the intermediary is being the card issuing company for VAT purposes.

Time of supply (tax point)

Due to the card issuing company being responsible for issuing the VAT invoice, it would be difficult to use the normal time tax point rules in respect of transactions undertaken using a procurement card, as it would be very difficult for the supplier to ascertain the correct time of supply in respect of the transaction. This could result in penalties and interest charges being imposed on the supplier if they get the time of supply wrong. Therefore HMRC has stated that they will accept the use

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