Continuous supply

What it means

A continuous supply is a supply of goods or services provided on an ongoing or recurring basis for agreed periods. Typical examples are rent, energy supplies, flat-fee bookkeeping, IT management, telecoms services and software subscriptions under a subscription model.

For VAT, what matters with a continuous supply is when the tax point arises. It arises on the last day of the period to which the payment relates, not on each day the service is physically provided. For a monthly bookkeeping fee for September, the tax point is therefore 30 September.

If the supplier receives payment in advance, for example an annual subscription paid in January, the tax point arises on the date the payment is received. Continuous supplies must therefore not only be invoiced correctly, but payments received and the periods they cover must also be tracked.

How it works in practice

An invoice for a continuous supply must be issued within the invoicing deadline, usually within 15 days of the end of the period invoiced. The supplier may also issue a single invoice for several future periods, provided it shows the individual periods and amounts.

In the books, income or expense is allocated to the period it relates to. If a company pays an annual subscription in advance, the cost is spread over the months through accruals and deferrals. Likewise, the supplier spreads subscription income over the period during which it provides the service.

With property leases, a continuous supply is combined with the question of whether the lease is exempt or taxed, discussed under property rental and VAT. Energy and services linked to a lease are often invoiced as advances followed by a settlement, which has its own rules.

What to watch out for

A common mistake is allocating VAT by invoice date instead of the end of the supply period. If a company invoices September only in October, the tax point still belongs to September. Incorrect allocation leads to discrepancies in the control statement and amended returns.

With continuous supply contracts, price changes such as indexation and contract termination must also be tracked. If a service continues after the contract ends without invoicing, there is a risk of unbilled revenue and unpaid VAT that only comes to light in an audit.