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HMRC internal manual

VAT Bad Debt Relief

Repayment of input tax: Use of invoice date

The date of supply is the same as the tax point that arises under the time of supply rules. It is not necessarily the same as the date of the invoice. If an invoice is not issued within 14 days of the basic tax point, which is the date when goods are removed or services are performed, then the date of the supply is that of the basic tax point.

In order to ease administration it is accepted that in most situations the invoice date can be treated as the relevant date unless a later date for payment has been agreed. The only exception, which is expected to occur rarely, is any case where the invoice is issued more than thirteen days after the date on which the goods were supplied or service performed and where the due date for payment falls before the date on which the invoice is issued. In this instance the input tax will become repayable six months after the date on which the goods were supplied or service performed, or (if later) the date when payment was due.

ExampleLooking at the position of the supplier and customer in turn:

  • the trader supplies goods on 1 June 2003;
  • date payment due 1 June 2003;
  • invoice issued on 1 July 2003;
     the supplier can claim bad debt relief on 1 December 2003.

The customer would usually be able to calculate the relevant date for repaying input tax from the date of the invoice - meaning he would have to repay input tax on 1 January 2004. As he has agreed a payment date prior to the invoice date, he is required to use the later of the basic tax point and the due date for payment - in this example both are 1 June 2003 - meaning he would have to repay input tax on 1 December 2003.