It is sometimes possible delay VAT liabilities on invoices, and extra care should be taken with the timing of invoices close to the VAT quarter end.
VAT Act 1994
The legislation states that VAT becomes due on the earlier of the following possible tax points:
- the services or goods have been supplied to the customer s.6(2,3)
- a VAT invoice is issued s.6(4)
- payment is received s.6(4)
14 day rule
An exception to this is if the VAT invoice is issued within 14 days of the service/goods being provided s.6(5). For example, if you completed the transaction 7 days before the VAT quarter end, the invoice could be raised within 7 days after the quarter end. This would defer the VAT liability for 3 months until the next quarter.
Use proforma invoice / request for payment to delay VAT
You can also use proforma invoices or requests for payment to delay VAT. Proformas are especially useful if your business takes advance payments/deposits or if services are provided on a continual basis. This will help delay the VAT liability arising until the payment is received. If using proformas or requests for payment make sure that they don’t mention any VAT amount or VAT registration numbers, and also write that “This not a tax invoice”.
But note that some businesses hate requests for payment as it may delay their own claim for input VAT on your invoice!