Actual tax points: VAT invoices: the 14 day rule
Section 6(5) of the VAT Act 1994 (see VATTOS2230) allows for the creation of a tax point by the issue of a VAT invoice within a period of 14 days after the basic tax point. This is often referred to as the ‘14 day rule’. Unusually such a tax point is not restricted to the amount actually invoiced. So, where the amount invoiced does not represent the full value of the supply, and the difference has not been subject to an earlier tax point, the issue of the invoice creates a tax point for the full value.
The rule should not be confused with the entirely different requirement of regulation13(5) of the VAT Regulations 1995. This obliges a supplier to issue a VAT invoice to other taxable persons within 30 days of the tax point for a supply. This is intended to ensure that the customer is in possession of an invoice for input tax recovery purposes. Because this requirement to issue an invoice only arises where a tax point has already occurred, it follows that a VAT invoice issued under this rule will not create the time of supply.
Adoption of the 14 day rule is not compulsory. Section 6(5) permits a business to opt out.In that case the tax point reverts to the basic tax point to the extent that an earlier tax point has not already occurred under section 6(4) (see VATTOS2225).The tax point also reverts to the basic tax point where a business who has not opted out of using the 14 day rule, fails to issue a VAT invoice within the 14 day period allowed.
A tax payer should normally be expected to apply the 14 day rule to all supplies or to opt out of its use altogether. There are some circumstances in which it is appropriate for it to be applied selectively, such as
- separate companies within a group registration may be permitted to individually elect whether or not to follow the rule
- supplies subject to self-billing arrangements may, for the purposes of the 14 day rule, be treated differently to supplies subject to conventional invoicing, and
- where a business has a genuine need to treat some supplies differently and can easily distinguish those supplies.
Those who elect not to use the 14 day rule may be permitted to include supplies with different basic tax points on the same invoice provided the tax point for each supply is clearly shown on the invoice. By this means a supplier may issue a single invoice for all supplies made to a particular customer over a period of up to 30 days of the earliest supply on the invoice.