Tax point

What it means

The tax point is the moment at which the duty to account for VAT arises. For goods it is normally the day of delivery, for services the day they are performed, and if payment comes first, the day it is received decides.

It has nothing to do with the invoice date or the due date. The invoice is only evidence of a taxable supply: if it is issued late, the liability arose long before and belongs to the earlier period.

For recurring services such as a lease or monthly support, the day of supply is the last day of the period the payment relates to. This is not the same as the accrual principle in the books: an annual subscription is spread over the months for accounting, but the tax on it arises at once when the prepayment is received.

How it works in practice

The tax point places the supply in a VAT period, that is in one particular VAT return and one line of the control statement. The statutory window for issuing the invoice runs from it as well.

Receiving money against a proforma for a deposit pulls the liability forward even if the goods ship months later. The bookkeeper therefore has to see the bank statement, not just outgoing invoices, or part of the tax goes missing.

The customer’s right to deduct arises on the same day, but it can be exercised only with the invoice in hand. When processing incoming documents we therefore record both the date of supply and the date of receipt: a December invoice received in February goes into the deduction no earlier than the period in which it arrived.

What to watch out for

The costliest mistake is pushing an end-of-month supply into the next period because of the invoice date. The customer deducts earlier, the mismatch surfaces automatically when the control statements are matched, and a request for explanation plus late-payment interest follows.

If an order is cancelled and the company refunds the deposit, the tax declared on the payment does not reverse itself. A corrective document has to be issued and the tax reduced in the period the money went back; forgetting it means paying VAT on a deal that never happened.