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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: Self-supply and other non-business use or disposal of assets

Introduction

There are various provisions in UK VAT law that deem supplies for VAT purposes where business assets are put to certain uses or are disposed of either permanently or temporarily. The time of supply rules for the various categories of deemed supply are as follows.

Section 5(4) of the VAT Act 1995 of the VAT Regulations 1995

A supply of services may be created by an order under section 5(4). This applies where services, originally acquired for business purposes are later put to private or other non-business use. Currently the only order is the VAT (Supply of Services) Order 1993 (SI 1993/1507) which is intended to catch supplies of services, such as construction work and computer software, capable of providing an ongoing benefit. For more information about this see the manual covering input tax. A tax point is created under regulation 81(2) of the VAT Regulations 1995 (see VATTOS2315) on the last day of each accounting period during which the supplies occur.

Section 5(5) of the VAT Act 1994

Section 6(11) of the VAT Act 1994 (see VATTOS2250) applies to self-supplies of goods created by an order under section 5(5). Self-supplies of cars fall within this category. The tax point is the time the goods are appropriated to the use that gives rise to the self-supply.

Paragraph 5(1) of Schedule 4 to the VAT Act 1994

The permanent diversion of goods to non-business use is deemed to be a supply of those goods under paragraph 5(1) of Schedule 4. This includes such things as goods taken from business stocks for private consumption. A tax point arises under section 6(12) (see VATTOS2255) when the goods are transferred or disposed of.

Paragraph 5(4) of Schedule 4 to the VAT Act 1994

A temporary diversion of goods to non business use is treated as a supply of services under paragraph 5(4) of Schedule 4. Typically this can occur where a yacht, say, normally used for business purposes, is temporarily used by the owner of the business in a private capacity. A tax point is created under section 6(13) (see VATTOS2260) at the time the goods are appropriated or, where the non-business use is of a continuing nature, under regulation 81(1) of the VAT Regulations 1995 (see VATTOS2315) on the last day of each prescribed accounting period during which the goods are made available or are used.

Establishing the tax point

In most circumstances the tax point will be self-evident from the facts of the case. Some difficulty may be experienced where the tax point is linked to appropriation. Appropriation for this purpose cannot normally be said to have taken place until at least the occurrence of some overt, unconditional event that can be said to demonstrate appropriation to the use that gives rise to the supply. A mere intention to appropriate the goods is not normally sufficient to create a tax point in these circumstances.