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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: Utilities (water, gas, electricity and the like)

Domestic supplies

Supplies of water, gas, electricity and the like are treated for VAT purposes as supplies of goods. They are invariably supplied on a continuous basis. For this reason there are special tax point rules under regulation 86 of the VAT Regulations 1995 (see VATTOS2340). This limits the tax point for supplies specified in regulation 86(1) to the earlier of the receipt of payment or the issue of a VAT invoice. But see below for details of the tax point rule that can apply in some circumstances where there is a delay beyond one year in issuing a VAT invoice or receiving a payment.

Regulation 86 also permits period VAT invoicing in the case of water, gas and electricity (see VATTOS5220).

Intra-EC supplies

Regulation 86(5) applies in cases where there is an intra-EC supply, in which case the tax point is the date of issue of the VAT invoice. However, for the reasons set out in the next paragraph, supplies of natural gas and electricity (and also heat and cooling) are unlikely to be subject to this provision. It should also be noted that supplies such as coal and bottled gas do not fall within the scope of the regulation and so are subject to the normal tax point rules for intra-EC supplies.

Natural gas and electricity

There are special place of supply rules for natural gas and electricity (and also heat and cooling) under which wholesale supplies involving buyers and sellers located in different countries are taxed in the Member State in which the purchaser is located. For more information about this see the manual covering the place of supply of goods, VATPOSG.

Under these arrangements the VAT is accounted for by the purchaser as a reverse charge. In the UK this is provided for under section 9A of the VAT Act 1994. Regulation 82A of the VAT Regulations 1995 (see VATTOS2325) establishes the tax point as either the date of payment or, in the case of non-monetary consideration, the last day of the VAT accounting period in which the goods are removed or made available.

Delays in invoicing and payment

The timing of the issue of a VAT invoice, or the receipt of a payment, has always been vulnerable to manipulation. Often this has been aimed at delaying accounting for VAT in cases where supplies are being made to a connected business not fully taxable. To prevent this, an annual tax point was introduced from 1 October 2003 by regulation 94B of the Value Added Tax Regulations 1995 (see VATTOS2385). Subject to various limitations to its general scope, this further tax point applies to supplies that fall within the scope of regulation 86. It is described more fully in VAT Information Sheet 14/03. Suppliers affected by regulation 94B can apply to vary some of the standard time limits set by the regulation. For further information about this see VATTOS9175