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VAT supply point date

VAT supply point date

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?


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07th Feb 2013 09:27

A little confused here..

I'm sorry hopefully it's just me, but I'm just not getting what's happening here...

Do we assume this is in connection with a supply of goods by your client, and if so on what terms are the goods supplied and when are they made available to the customer.

If it's not to do with a supply of goods then presumably this is a question of when exempt income needs accounting for for Partial Exemption? You keep mentioning accounting for the VAT but providing finance for a fee is an exempt supply so I'm not sure what VAT you're actually looking at here.

Also you seem to want to postdate an invoice by 60 days and I'm not sure from what you've said whether you think that'll mean the VAT (what VAT?) is accountable on day 1 or day 60, and currently your client creates an invoice but doesn't give it to anyone and is using the invoice date as the tax point despite it being unissued?

So I think I'd need some clarity on:

What the finance is provided in connection to?

When the finance is actually provided, If your client advances £500 on day 1 then I'm not sure how you get a revised tax point of 30 days or 60 days if the customer doesn't pay it back, surely they've still got the finance they received on day 1?

What invoices customers actually receive and what supplies the invoices actually cover?

What are you accounting for Output Tax on in the supply chain?

Or it may be that someone else can see what's happening here more clearly than I can and will advise below.


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By Halex
10th Feb 2013 21:54

sorry for confusion

 I have been a little too vague here. This relates to invoice factoring and there is no VAT exemption. The current position is that the client raises an invoice at the start for the factoring fee and then later if necessary an extension fee for late payment. But he wants to change this to raise a fee for the first 30 days, an additional fee for the next 30 days etc. Hence VAT is payable on each of these fees. However he only wants to send  one invoice to his customer hence my problem with the the supply point as there is more than one. My only workaround was to end up at a poistion with one invoice raised at the end point once we know how many months the invoice has been factored. According to HMRC however the service was supplied on day 1 so we have to account for the VAT from this point which leads me to raise an invoice and then a credit note with a revised invoice if the period of credit goes beyond 30 days. This puts the VAT into the correct periods but leads to a single final invoice. This is similar to the utilitiy companies who issue an invoice before you send a meter reading then send a credit note and revised invoice once they have the correct meter readings

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