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HMRC internal manual

VAT Time of supply

Identifying a tax point: supplies by those not registered for VAT

It is sometimes necessary to apply the time of supply rules to supplies made by persons who are not registered for VAT. This can be the case, for example, when calculating turnover for VAT registration purposes or for determining whether supplies made by somebody who is newly registered for VAT occurred before or after the effective date of registration.

The position here is the same as for exempt and zero-rated supplies (see VATTOS3700). A person who is not registered for VAT, cannot issue a VAT invoice. But apart from this the time of supply rules apply equally to supplies made by non-VAT registered persons.

The only exception is in the case of some continuous supplies that fall within the scope of regulation 90 of the VAT Regulations 1995 (see VATTOS2355).Where a supplier is not registered for VAT, the time of supply does not occur until apayment is received. This means that any payments received after the supplier has registered will be liable to VAT. This despite the fact that the work may have been performed before hand.

Following the Court of Appeal decision in B J Rice and Associates([1996] STC 581), payments in these circumstances may exceptionally be treated as not being liable to VAT provided:

  • they are received for a continuous supplies of services;
  • made to a specific customer; and
  • and are for supplies which wholly ceased prior to registration.

It must be emphasised that this does not extend to payments for supplies that are to continue following registration. The normal rules apply in these circumstances and payments received after registration remain liable to VAT regardless of when the work was actually performed.