Payments: How are payments attributed?
Regulation 170 sets out the basis for attributing payments received when calculating the amount that remains ‘outstanding’. Where more than one supply has been made and a payment is received in relation to those supplies the payments should be allocated to the earliest supply first. (VAT Act 1994, section 6 sets out the time of supply rules - there are significant differences in the time of supply for goods and services, seeVATTOS4000)
The exception to this is when a payment is specifically allocated by the customer to a particular supply and the supply is paid for in full. In such cases, the payment is attributed in accordance with the customer’s instructions.
Where more than one supply is made on the same day, payments are attributed equally across all the supplies. See VBDR2400for special rules for supplies of goods under hire purchase, conditional sale and credit sale agreements.
Example showing the attribution of payments under Regulation 170(2)
Supplies all made to the same customer
|Ref Number||Date of Supply||Net||VAT||Gross|
|03 (zero-rated supply)||01.02.2003||500||500|
|01.04.2003||500||All allocated to Supply 01.|
|01.06.2003||352.5||Customer specifies that the payment is for Supply 04 and so it is allocated in full to 04.|
|01.10.2003||1500||First 87.50 allocated to Supply 01. Remaining 1,412.50 attributed equally to Supplies 02 and 03.|
Attribution to Supply 02 =
1,412.50 x 1,175.00 1,675.00 = 990.86.
Attribution to Supply 03 =
|1,412.50 x 500.00 1,675.00 = 421.64.|
Amounts ‘outstanding’ for each supply
|Reference Number||Amount Paid||Amount Outstanding|