Have you ever wondered at what point VAT becomes chargeable or can be reclaimed? Is this necessarily always the invoice date? Interestingly, the answer to the 2nd question is NO. There are certain scenarios when a different basis is used for determining the point at which VAT is effective. In this article we will first explore the different Basic Tax Point (BTP) for goods, services and goods sold on a Sale or Return basis, following which we will consider circumstances where the Actual Tax Point (ATP) replaces the Basic Tax Point. We will conclude by looking at VAT when there are deposits involved.

Let’s start with goods. Typically, the BTP for goods is the moment they’re dispatched to the customer. However, if payment for goods occurred before they were dispatched, the invoice was raised prior to dispatch or if the invoice has been raised in the 14 days following dispatch, the tax point shifts to the date either of these 3 scenarios occurred. These 3 scenarios are termed ATP. The ATP now becomes the date that VAT is effective for the transaction.

VAT on goods sold on a ‘sale or return’ basis is slightly more complicated. In this case, BTP is the earlier of the date the goods are adopted by the customer and 12 months following the dispatch date. However, should any of the aforementioned 3 scenarios concerning ATP occur, VAT will be accounted for in terms of the ATP.

Lastly, the BTP for services is when the service has been performed. This is seen as the date when substantially all the work has been completed barring invoicing. However, if the customer has paid for the service in advance or if an invoice is raised in the 14 days following completion of the service, ATP will replace BTP.

If the customer makes a deposit toward goods or services, it shouldn’t be surprising that this creates a separate tax point. This is consistent with the rule that where a customer makes payment before dispatch of goods or receipt of service, the ATP replaces the BTP. A second tax point will occur when the goods are dispatched (or service is performed) or if either of the ATP situations arise.

Please get in touch with us at info@cheylesmore.com if you need assistance with your VAT compliance.