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HMRC internal manual

VAT Time of supply

HM Revenue & Customs
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Tax points for specific types of supply: construction: contracts requiring periodic payments by the customer


Regulation 93 of the VAT Regulations 1995 (see VATTOS2370) covers supplies made under a contract which requires the customer to make periodic payments to the supplier. To fall within the scope of the regulation the contract must provide for two or more payments, although the proportion of the contract price due a teach stage is not a factor. A contract that calls for an initial nominal payment, followed by a single payment of the balance of the contract price, is therefore covered by the regulation in the same way as a contract that requires a series of substantial payments. Regulation 93 does not apply to single payment contracts that allow for a retention (see VATTOS9120).

As well as the more obvious supplies made by contractors, sub contractors and those directly engaged in building work, the regulation also applies to ancillary supplies made by architects, surveyors, consultants or those acting in a supervisory capacity. But it does not extend to such things as the hire of plant and machinery.

The scope of the regulation is similarly wide ranging when it comes to the type of activities covered and is not restricted only to new or major building work. Work to existing buildings in the form of alterations, repairs, maintenance and demolition and other civil engineering works is also included.

The use of regulation 93 is governed by the terms of the contract rather than by the actual existence of stage payments. In considering whether regulation 93 applies it is therefore important to remember that a contract does not necessarily have to be written. It can be oral or simply implied by the conduct of the parties involved. This means, for instance, that adoption of regulation 93 is not precluded by the absence of a written agreement or contract. Where there is no written contract, the subsequent receipt of interim payments can normally be accepted as evidence that supports the prior existence ofa stage payment contract, provided there is no evidence to suggest that the parties originally intended anything different.

Anti-avoidance measure

In the normal course of events regulation 93(1)(a) and (b) provides for a tax point on the earlier of receipt of payment or issues of a VAT invoice. To prevent this being exploited for avoidance purposes regulation 93(1)(c)(ii) provides for a tax point on completion of the work, for ‘funded’ supplies as defined in regulation 93(2).(Incidentally, regulation 93(1)(c)(i) reflects earlier anti-avoidance content of the regulation and is only relevant to work that was completed between 9 December 1997 and 9June 1999.)

What is meant by completion of the work?

For supplies subject to this regulation 93(1)(c) tax point, completion of the work by main contractors (that is those whose supplies represent the actual completion of the building work) can normally be based on the date of the architect’s certificate of practical completion. If there is undue delay in this certificate being issued, it will be necessary to establish the precise date on which the contracted work was actually completed (excluding any period allowed for rectification of faults, commonly referred to as ‘snagging’). The date the work is physically completed also applies to supplies (for example by sub-contractors, consultants, and the like) performed before the main building work was completed.

If there is disagreement between supplier and customer on whether a contract has been fulfilled, the determining factor is normally the view of the supplier. Where the supplier considers that the contract has been fulfilled, the work is also to be regarded as having been completed for the purposes of regulation 93. There can be occasions where the work ceases before the contract has been completed. This can occur where, for example, there is a dispute or one of the parties to the contract goes in to liquidation. In that case performance of the services is regarded as having been completed at the time the work ceases. Further information about this and other aspects of the rules as they apply to funded supplies are set out in Notice 708 (Buildings and construction).