My client supplies finance for a fee for which he currently raises an invoice at the time the finance is provided. He does not send this straight to the client but waits to see when he will be repaid. If he is repaid late he currently raises a second invoice at the time the payment becomes overdue so each invoice clearly has the correct tax point.
Client now wants to reduce the length of the charging periods to create more fee flexibility. With the existing method this could create many invoices for a single loan period therefore creating more tax supply dates. But he only wants to issue 1 invoice to customer. According to HMRC the tax point is the first date of supply of the finance, but as long as he accounts for the VAT at the point of supply then that is fine. My suggestion therefore is that he raises first invoice on day 1 in his accounting package when he advances the finance, then if the repayment is overdue, raises a credit note for the day1 invoice and raises a day 31 invoice with the new fee and revised VAT and so on until the amount is repaid. If payment is received on day 60 he can then credit previous invoice and raise final invoice. This would have a tax point of day 60.
Is there a problem here with sending just 1 invoice to the customer dated day 60? The proposal seems to satisfy the HMRC requirement to account for the VAT at the supply point but have I missed a problem elsewhere?