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Steve Allen, Director of VAT Solutions (UK) Ltd, provides some tips to legitimately delay the payment of VAT.

{mosimage}The basic rule

The basic rule is that VAT has to accounted for at the time the goods are ‘made available’ (usually delivered) to the customer.  However, this is overridden by the actual tax points, which are the earlier of either:

• invoice date (if issued within 14 days of the basic tax point);  or
• receipt of payment.

With services, the basic tax point is when all the work, except billing, is completed.  Again, this is overridden by the actual tax point, which is the issue of an invoice or receipt of payment, if earlier.

For businesses that make ‘continuous supplies of services’, for example accountants, consultants and solicitors where periodic invoices are issued and payments received the tax point is the date of invoice or the date of receipt of payment, whichever is first.

These tax point rules can be used to your advantage and, in many cases, can push the tax point back to the receipt of payment, even for businesses that are not on cash accounting.

If your business supplies services, the tax point rules can be used to your advantage much more so than for businesses which supply goods.  Remember, building and construction works are seen as services rather than goods.

Tip

Some of the things that can be done to delay paying over the VAT until you have received payment for your services are:

• Do not issue a VAT invoice, but issue a ‘request for payment'.  Once you have been paid, you issue the tax invoice. The tax point is the receipt of the payment.
• If you are involved in the construction industry you can use ‘authenticated receipts’ rather than VAT invoices.  Disputes over the value of interim payments are common in this sector so rather than issue an invoice that will be disputed, issue an authenticated receipt showing the value of the work done.  Once it has been agreed the customer authenticates it and returns it to the supplier along with payment and creates a tax point at that later date.  There is no need to issue a VAT invoice in these circumstances.