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HMRC internal manual

VAT Time of supply

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HM Revenue & Customs
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Tax points for specific types of supply: Continuous supplies of services: Applications to vary regulation 94B time limits

 
 
 
 
 
 

Background

Suppliers affected by regulation 94B of the Value Added Tax Regulations 1995 (see VATTOS2385) can apply to vary some of the standard time limits. This is intended to allow them to adapt the requirements to fit in with their normal commercial arrangements. You may therefore receive applications to vary the following aspects

  • nominating a different initial annual tax point date (paragraph 4.3 of Information Sheet 14/03)
  • varying the 6 month invoicing and payment period (paragraph 4.5 of Information Sheet 14/03)
  • electing not to be bound by the 6 month rule (paragraph 4.5 of Information Sheet 14/03), or
  • further changes to the annual tax point date (paragraph 5 of Information Sheet 14/03).

In each case the supplier is required to apply in writing.

Nominating a different initial annual tax point date

Under regulation 94B(5)(a) and (b) the first annual tax point date is either 30 September 2004 (where the supplies commenced before 1 October 2003) or twelve months after commencement in all other cases. Regulation 94B(5)(c) permits a supplier to nominate a different date provided it is earlier than it would otherwise be under the standard rule. This alternative date can cover all the supplies affected by the new rule or different dates can be nominated for different categories. The only additional requirement for the latter is that the supplies must be described in sufficient detail to be easily identifiable.

Exercising this option is not subject to HMRC approval. Applications can therefore only be rejected where multiple annual tax point dates are nominated with insufficient detail. In that case the tax payer is to be requested to provide further details or, failing that, to nominate a single date to cover all supplies.

Satisfactory applications need only be acknowledged to the effect that the first annual tax point will arise on the date(s) specified and on each anniversary thereafter.

Varying the 6 month invoicing and payment period

Regulation 94B(7) permits applications to be made to vary the 6 month period allowed under 94B(6) for the issue of a VAT invoice or receipt of a payment. This covers both extensions and reductions to the standard six months, but it is anticipated that most applications will be for extensions.

In considering applications you should be mindful of the fact that the six month period is intended to minimise the impact on those affected by an annual tax point who are not deliberately manipulating the normal rules. Consequently where an annual tax point occurs, the supplier still has the opportunity to account for VAT by reference to the issue of a VAT invoice or receipt of payment provided this happens within 6 months of the annual tax point. For example, a supplier’s annual tax point for management services may be linked to the financial year end. However, finalising the management charge will probably be subject to the year end audit which will not be completed until sometime after the year end.

The standard six months should provide sufficient time to meet most eventualities. However, it is accepted that there will be exceptions. Consequently suppliers may apply for extensions to the standard six month period where they have genuine commercial reasons for doing so. In considering such applications, you need to be satisfied that it is justified based on the individual facts of the case and, if approved, will be consistent with the intention to minimise the impact on those not seeking to exploit the normal rules. You should reject applications which do not appear to meet this criteria.

There is no legal limit to the length of the extension but it is not anticipated that this will normally be any more than two or three months. Cases involving longer periods should be referred to Place & Time of Supply Team who may also be consulted in other cases of doubt or difficulty. Satisfactory applications may be approved locally by issue of a suitable approval letter.

Electing not to be bound by the 6 month rule

Regulation 94B(6) permits suppliers to opt out of using the six month rule so that the tax point becomes the annual tax point date in all cases where regulation 94B has effect. To exercise the option a supplier is simply required to notify HMRC in writing. Any such notification should be acknowledged and retained on EF.

Further changes to the annual tax point date

Further changes to the annual tax point date are permitted under regulation 94B(8). This is intended to provide flexibility in the event of a supplier’s circumstances changing for unconnected commercial reasons. For example where there is a change in financial year end. However, unlike the initial option to set an alternative annual tax point date (as above) this is subject to HMRC approval. In considering such applications you need to be satisfied that it is justified based on the individual facts of the case. Also, where the application covers some, but not all, of the supplies affected by regulation 94B, you will need to be satisfied that these supplies are described in sufficient detail to be easily identifiable. You should reject applications which do not meet original criteria. Satisfactory applications may be approved locally by issue of a suitable approval letter.