Is VAT due when a payment is made or when a service is taken?

mrochester

mrochester

mrochester

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I understand as a customer the payment plus VAT can be made at any time. But for a business, when is the VAT due? Is it when the payment is made by the customer or when the service is taken?

The reason I ask is because I could potentially be in for a partial refund for a service I have paid for but haven’t yet taken depending on what the rules are.

Many thanks.

M.
 
mrochester said:
I understand as a customer the payment plus VAT can be made at any time. But for a business, when is the VAT due? Is it when the payment is made by the customer or when the service is taken?

The reason I ask is because I could potentially be in for a partial refund for a service I have paid for but haven’t yet taken depending on what the rules are.

Many thanks.

M.
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Easy question to answer! It depends.

https://www.gov.uk/vat-record-keeping/time-of-supply-or-tax-point
 
It depends on what the service is but the general rule is the tax point is created when service is provided. It all depends on the time of supply.

This can then be overridden depending on if any payment has been made prior to the service being provided. If you've already paid and / or received an invoice, the tax point has been created so the VAT is due as of that point.

If the business runs the cash accounting scheme, VAT is due as of when payment is received for almost all cases so the same outcome in this situation.

It shouldn't make any difference for you as a consumer though and the VAT can just be adjusted on a future return if its already been accounted for.
 
DanTheMan said:
It depends on what the service is but the general rule is the tax point is created when service is provided. It all depends on the time of supply.

This can then be overridden depending on if any payment has been made prior to the service being provided. If you've already paid and / or received an invoice, the tax point has been created so the VAT is due as of that point.

If the business runs the cash accounting scheme, VAT is due as of when payment is received for almost all cases so the same outcome in this situation.

It shouldn't make any difference for you as a consumer though and the VAT can just be adjusted on a future return if its already been accounted for.
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So it's a holiday cottage holiday I'm talking about. The holiday is taking place on 29 August but the balance was paid in full on 12 June. The booking was confirmed by the agent on 17 June.
 
If you have paid in full, then it is likely you have received an invoice and according to the link above

Payment or invoice issued in advance of supply VAT is due Date of payment or invoice (whichever is earlier)
Payment in advance of supply and no VAT invoice yet issued VAT is due Date payment received

So in either scenario payment has been received so they will have passed their VAT due date if I read that correctly.
 
pepp77 said:
If you have paid in full, then it is likely you have received an invoice and according to the link above

Payment or invoice issued in advance of supply VAT is due Date of payment or invoice (whichever is earlier)
Payment in advance of supply and no VAT invoice yet issued VAT is due Date payment received

So in either scenario payment has been received so they will have passed their VAT due date if I read that correctly.
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That's what I think it is saying.
 
The BBC are reporting that the rate cut applies to the following:

"This cut will apply to eat-in or hot takeaway food and non-alcoholic drinks from restaurants, cafes and pubs, accommodation in hotels, B&Bs, campsites and caravan sites, and attractions like cinemas, theme parks and zoos."

So it would seem self-catering cottage accommodation is excluded anyway, assuming that is a comprehensive list.
 
mrochester said:
So it's a holiday cottage holiday I'm talking about. The holiday is taking place on 29 August but the balance was paid in full on 12 June. The booking was confirmed by the agent on 17 June.
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Unless I've missed something to do with hospitality / accommodation rules, the company will account for vat at 20% regardless of VAT scheme they are on.

Only scenario I can think of where it may get more complicated is if for example you stayed at the accommodation from 20th-29th August and paid for your stay on checkout / received an invoice on checkout. If the VAT rate changed on the 29th, the company could technically charge the new rate of VAT for the stay as the tax point would be created when payment is made and the invoice is issues.

Either way, its not a huge accounting change for the company.
 
mrochester said:
The BBC are reporting that the rate cut applies to the following:

"This cut will apply to eat-in or hot takeaway food and non-alcoholic drinks from restaurants, cafes and pubs, accommodation in hotels, B&Bs, campsites and caravan sites, and attractions like cinemas, theme parks and zoos."

So it would seem self-catering cottage accommodation is excluded anyway, assuming that is a comprehensive list.
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Never rely on any journalists when it comes to technical matters, whatever area that may be in.

The specific wording in the policy document is that the VAT reduction will apply to “supplies of accommodation...”.
 
DanTheMan said:
Unless I've missed something to do with hospitality / accommodation rules, the company will account for vat at 20% regardless of VAT scheme they are on.

Only scenario I can think of where it may get more complicated is if for example you stayed at the accommodation from 20th-29th August and paid for your stay on checkout / received an invoice on checkout. If the VAT rate changed on the 29th, the company could technically charge the new rate of VAT for the stay as the tax point would be created when payment is made and the invoice is issues.

Either way, its not a huge accounting change for the company.
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I think you may have missed the temporary reduction in VAT to 5% for certain supplies.
 
Pudney said:
I think you may have missed the temporary reduction in VAT to 5% for certain supplies.
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If he's already paid for the accommodation and been issued an invoice, the VAT will be charged at the current rate even if the booking isn't until the end of August, after the reduction takes place.
 
DanTheMan said:
If he's already paid for the accommodation and been issued an invoice, the VAT will be charged at the current rate even if the booking isn't until the end of August, after the reduction takes place.
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That would be my assumption too, and I'd be shocked if it turned out incorrect. But I also wouldn't bet on anything in current circumstances, particularly whether the government would look to include some form of relief for situations like this.
 
VincentHanna said:
Yeah, if the invoice was raised in June, then you pay the VAT as it was in June.

Can't see how you can get a refund on it now to be honest.
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That’s why I was trying to find out when the business pays the vat due, when the payment is made or when the service is taken.
 
Pudney said:
That would be my assumption too, and I'd be shocked if it turned out incorrect. But I also wouldn't bet on anything in current circumstances, particularly whether the government would look to include some form of relief for situations like this.
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It wouldn't surprise me if they allow some backdating to try and stop 'cancel and rebook' becoming a thing and causing more problems for these industries than they solve.
 
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