VATTOS5240 - Actual tax points: VAT invoices: extensions to the 14 day rule
Applications
Under section 6(6) of the VAT Act 1994 (see VATTOS2235) businesses may apply for an extension to the 14 day period allowed under section 6(5) (see VATTOS2230). All applications are to be made in writing and you should only consider allowing an extension for supplies where the tax payer is genuinely unable to issue an invoice within 14 days of the basic tax point. In other words a blanket extension should not be allowed unless this is justified.
Reasons for extending
A typical example is a supplier who cannot fix the price of their supply until they have themselves been invoiced for materials or sub contractors’ charges. A further example involves supplies where the price is subject to later negotiation and agreement. An extension should not be allowed simply for reasons of preference or convenience, or because of difficulties arising from the tax payer’s own accounting systems or accounting practices. Also extension of the 14 day rule should not be adopted as an alternative to the accommodation tax point procedures designed to allow monthly invoicing (see VATTOS6200).
Period to be allowed
There is no legal limit to the length of extension that may be allowed under section6(6). However, one of the drawbacks in allowing an extended period is that any payment received between the basic tax point for the supply and the time when the invoice is eventually issued will not create a tax point. For this reason extensions in excess of three months should only be permitted in exceptional circumstances. In considering applications for longer periods you should give due regard to the extent to which payment is likely to be received before an invoice is issued and the likelihood of this being manipulated to the tax payer’s advantage. If, despite there being a danger of payment being received in advance of the eventual invoice, you are nevertheless of the opinion that the business has made a genuine case for special treatment, you should seek further guidance from the VAT Principles Team. It may also be possible to devise an alternative solution using the accommodation tax point arrangements (see VATTOS6000).
An important feature of any extension is the fact that the tax point is only delayed provided a VAT invoice is actually issued within the extended period. If, for any reason, the supplier fails to issue an invoice within the timescale that has been approved, the tax point will revert to the earlier basic tax point rather than the date of expiry of the extended period.
Form of approval
Approval for all extensions to the 14 day rule should be given in the following form.
To: (Name and address of applicant)
Value Added Tax - Time of Supply
In reply to your request of ……………………., the Commissioners for Her Majesty’s Revenue & Customs hereby direct that, providing the VAT invoice for the supply concerned is issued within ……………………… days/months after the date when the supply is made, each of the under mentioned supplies which you make in the course of your business shall be treated as taking place on the date when the VAT invoice for the supply is issued by you, except to the extent that the supply is covered by a payment received before the supply was made.
The supplies in respect of which this direction is made are as follows:
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
For other supplies, unless special directions have been given, the normal tax point rules, as explained in Notice 700 (The VAT Guide), must be followed.
Date:
Signature:
For and on behalf of the Commissioners for Her Majesty’s Revenue & Customs