Chapter 3 - Returns and payments of tax – main rules

74. Tax due on supplies

Summary

This section sets out various rules for the time when VAT becomes due, or when a liability for VAT arises, in respect of supplies of goods and services. The general rules are that the VAT is due when the supplies of goods and services are made, or when an invoice should be issued in the case of supplies to VAT-registered persons. The section also contains rules for utility bills, for deposits or advance payments, and for adjustments for cancelled deposits that are retained.

Details

(1) The date upon which tax becomes due in respect of supplies of goods and services is fixed in subsection (1) as follows:

• (1)(a) In relation to a transaction between taxable persons, the tax becomes due on the date of issue of the invoice or, if the invoice has not been issued at the proper time, on the date on which it should have been issued. (See Chapter 2 of this Part in regard to the date on which an invoice is required to be issued).
• (1)(b) Paragraph (b) deals with the liability which arises through the issue of an incorrect invoice or credit note by a taxable person, or the issue of an invoice showing tax by an unregistered person – see section 69(1) and (2). In any of these circumstances the tax falls due on the date of issue of the invoice or credit note in question.
• (1)(c) In the case of continuous supplies of utilities (i.e. gas, electricity and telecommunications) to non-business and other unregistered customers, the tax is due when the utility company issues the bill to the customer, provided that it issues a bill at least once every three months. If a bill is not issued at least once every three months, the rule at paragraph (d) applies. The VAT rate is the rate in force at the date the bill issues to the consumer.

(1)(d) Paragraph (d) provides that in any of the circumstances not dealt with in paragraphs (a), (b) or (c) the tax becomes due on the date of the supply.

(2) Early payments are covered in subsection (2). This situation arises where payment is received in respect of a supply of goods or services before the supply is completed. Advance payment for supplies in the State are treated in the same way as actual physical supplies of goods. In other words, the goods for which the advance payment is being made are regarded as having been supplied, to the extent that they have been paid for, and the normal rules of accountability apply.

An advance payment in respect of an intra-Community acquisition of goods is not regarded as a supply. This is because the corresponding intra-Community supply in the other Member State cannot arise until the goods have been physically dispatched or transported from that other Member State. Similarly, an advance payment received relating to an intra-Community supply, or to the supply of a new means of transport to a person in another Member State, is not regarded as a supply and does not give rise to a charge to tax. The latter event only arises when the goods are physically dispatched or transported to that other Member State.

(3) Subsection (3) provides that where tax is due on the invoice basis under subsection (1)(a) or (b) or on utility bills under subsection (1)(c), then an accountable person who is not on the cash receipts basis (see section 80) and who receives advance payments must account for tax by reference to the date of issue of the corresponding invoice, rather than the date of receipt of payment (i.e. the advance payment rule at subsection (2) doesn’t apply.)

(4) A special VAT rule applies if a deposit is retained by the supplier in the event of a cancellation by the customer – as there was no supply, the supply can reduce his/her VAT liability by the VAT originally accounted for on the deposit amount.

Payment of a deposit is a prepayment for the supply of the goods or services to which it relates, and a supply of goods or services is deemed to have taken place to the extent of the prepayment. Where such supplies are taxable, tax is chargeable on the deposit in accordance with subsection (2) . This subsection provides that the supplier can reduce his or her VAT liability by the amount of VAT paid in connection with a deposit in circumstances where the consumer subsequently cancels the transaction relating to the deposit and the supplier retains that deposit, provided the following conditions are met:

(a) that the supply does not take place because the customer has cancelled it,

(b) the cancellation is recorded as such in the books and records of the supplier,

(c) the deposit is not refunded to the customer, and

(d) no other consideration, benefit or supply is provided to the customer by any person in lieu of that amount.

Where these conditions are fulfilled the supplier may reduce the amount of his or her VAT liability for the period in which the deposit is forfeit by the amount of VAT already accounted for on the deposit. Where the supplier retains the deposit in these circumstances, he/she must issue a credit note to the customer. If the customer was an accountable person and was entitled to a credit for VAT charged on the deposit, then he/she must adjust his or her VAT liability.

Relevant Date: Finance Act 2020