View the related Tax Guidance about Self-billing
Self-billing
Self-billingThis guidance note provides an overview of the rules relating to self-billing arrangements.What is self-billing?Self-billing is a commercial arrangement between a customer and a supplier under which the customer prepares the invoice on behalf of the supplier and forwards a copy of that invoice to the supplier. The supplier remains responsible for payment of the output tax due. Self-billing is commonly used where the customer is in a better position to know what has been supplied under the contract and the tax point. A typical example is where the customer holds call off stock at its premises and raises a self-billed invoice when it removes stock from the warehouse. A customer can issue a self-billed invoice if the following conditions are met:•the supplier has agreed to accept self-billed invoices•the customer and supplier have a self-billing agreement in place•the customer using self-billing meets the conditions explained belowConsiderationsBusinesses that agree to use self-billing must ensure that they consider the following points:•the customer can only recover the VAT charged on the self-billed invoice if all of the conditions outlined in this guidance note are satisfied•the customer is responsible for ensuring that the VAT treatment of the transaction is correct (although the supplier should also check when they receive a copy of the self-billed invoice as they still pay the output tax due to HMRC)•both parties must agree to use self-billing and an agreement must be signed before any invoices are issued•if the customer is raising
Domestic reverse charge ― accounting requirements
Domestic reverse charge ― accounting requirementsThis guidance note provides details of the accounting and invoicing requirements that need to be met by businesses who are required to account for VAT using the reverse charge. For details of the specific requirements for the supplies covered by the reverse charge, please see the following guidance notes:•Domestic reverse charge ― overview•Domestic reverse charge ― mobile phones and computer chips•Domestic reverse charge ― trading in carbon emissions•Domestic reverse charge ― wholesale trading in electricity and gas•Domestic reverse charge ― wholesale electronic communication services•Domestic reverse charge ― supplies of building and construction services ― overview•Domestic reverse charge ― trading in renewable energy certificatesInvoice requirementsBusinesses involved in a reverse charge supply of specified goods must take the following course of action. The supplier must not charge VAT on the transaction if it falls within the scope of these provisions as responsibility to account for any VAT due is transferred to the customer.The supplier should issue an invoice to the customer showing all of the normal information and a narrative that is used to indicate to the customer that they are required to account for VAT under the reverse charge. Please see the UK VAT invoice requirements guidance note for more information on the invoice requirements.The amount of VAT due under the reverse charge rules must be clearly stated on the invoice but should not be included in the amount shown as total VAT charged.One of the following narratives
VAT review ― registration and compliance
VAT review ― registration and complianceThis guidance note is intended to provide more detail on areas to consider during a VAT review which relate to general compliance. This document should be used in conjunction with the Checklist ― VAT review when undertaking the actual review in order to ensure that all relevant items have been covered.Whilst this guidance and associated checklist have been prepared to seek to cover the common issues and risks which might arise, care should be taken to ensure that any specific business or sector issues are considered as part of a comprehensive review.VAT returns and compliance ― return and payment deadlinesA typical starting point when undertaking a VAT review or due diligence exercise is to confirm whether all VAT returns and payments have been made on time. The VAT return and any payment due must reach HMRC by the due date stated on the return. For a normal return, this will be:•no later than one month after the end of the VAT return period, and•no later than one month after the effective date for cancellation of registration (or, in the case of a business that had failed to register, one month after the date when liability to be registered ceases)Businesses can check the payment deadline using the payment deadline calculator provided by HMRC.If during the course of a VAT review it is identified that returns or payments have been made late, the next step will be to confirm whether the business has
Time of supply (tax points)
Time of supply (tax points)This guidance note provides an overview of the main tax point rules for goods and services.Why are tax points important?The tax point determines the date upon which a business is required to account for output tax to HMRC and it is also the point at which input tax can be recovered by the customer. The tax point rules for goods and services are different and special rules apply to certain types of supply and care needs to be taken to ensure that the correct rules are applied.Failure to account for output tax in the correct VAT return period can result in the imposition of interest and possibly penalties if the business is deemed to be careless or deliberate when failing to account for VAT correctly, see the Penalties for inaccuracies in returns ― overview guidance note.The tax point also helps to determine the date that a business exceeded the VAT registration threshold and is required to register for VAT; it can also help to determine whether a business is still required to be VAT registered. See the VAT registration and deregistration ― overview guidance note. When are tax points created?It should be noted that there can be more than one tax point created in relation to a supply; for example, if the customer pays a deposit before the goods / services are supplied. This is deemed to be an advance payment and VAT will be due on the amount of the deposit.It should be noted
Credits and debits
Credits and debitsThis guidance note provides an overview of how debits and credits should be dealt with from a VAT perspective.Crediting a customerIf a supplier has agreed to issue a credit note to a customer or offers a contingent discount and the customer is able to recover all of the VAT incurred, the supplier and customer can agree to issue a credit note without VAT. If the parties do not agree that the credit note may be issued without VAT, the supplier should issue the credit note including VAT and the VAT amount should be recovered from HMRC via the suppliers' VAT return.If preferable the customer can issue the supplier with a debit note. This option is commonly used if the customer has been issuing self-billed invoices (see the Self-billing guidance note for more information). Regulations for VAT adjustments in the course of business (reg 38)The Government has introduced legislation that amends the rules on output tax adjustments for retrospective price reductions with effect from 1 September 2019. From this date, businesses can only make adjustments where they have actually given customers a refund. The regulations have been mended to reflect the following changes:•an increase in price occurs is when both the supplier and the customer agree to the change. A debit note must be issued no later than 14 days after the price increase. The supplier must account for the increase in VAT in the VAT return period covering the date the change occurs. •a decrease
Land and buildings ― building work ― invoices and authenticated receipts
Land and buildings ― building work ― invoices and authenticated receiptsThis guidance note provides information on invoices and authenticated receipts for building work.Detailed commentary on invoices and authenticated receipts is included in De Voil Indirect Tax Service V3.511 to V3.529.Summary of points to considerThe table below provides a summary of points to consider when an invoice or authenticated receipt is issued or received in relation to building work.Points to considerRelevant sections of this guidance noteWhere was the building work carried out?Place of supplyWhen was the building work carried out?Time of supplyDoes the tax point anti-avoidance rule apply?Tax point anti-avoidance ruleWhich party is responsible for accounting for any VAT due on the supply?Reverse chargeWill an invoice or an authenticated receipt be issued?Invoice or authenticated receiptWill a self-billed invoice be issued?Self-billingWhat rate of VAT should be applied?Applying the correct VAT treatmentWho carried out the building work?Self-supplyPlace of supplyBuilding work that is carried out in the UK, including on sites within the territorial sea of the UK, is within the scope of UK VAT regardless of where in the world the supplier of the construction services belongs. It may be necessary for a VAT registered recipient of a supply of construction services to apply a procedure known as the reverse charge and account for any VAT due on the supply. For more information on the reverse charge, please refer to the ‘Reverse charge’ section of this guidance note. Building work that is carried out on sites
Guide to completing a UK VAT return
Guide to completing a UK VAT returnThis guidance note provides information on the contents of a UK VAT return. Information on completing a VAT return for businesses using the flat rate scheme is included in the Flat rate scheme (FRS) ― operating the scheme guidance note.Box 1: VAT due on sales and other outputsThis is the total amount of VAT charged on goods and services in the return period. Businesses should ensure they include VAT payable to HMRC for certain supplies which may be made outside their core business such as:•VAT due in the period on imports accounted for through postponed accounting (see the Imports ― postponed accounting for import VAT guidance note)•VAT on the fuel scale charge (see the Input tax ― Motoring expenses guidance note)•the sale of stocks and assets•VAT on goods taken out of the business for private use•VAT due under the reverse charge•supplies to staff•output VAT on gifts of goods (see the Supply and Consideration ― business gifts and samples (deemed supply) guidance note)•commission received from selling something on behalf of someone else (agent’s commission)•VAT shown on self-billed invoices issued by the customer (see the Self-billing guidance note)Notice 700/12, para 3.2Other noteworthy points when completing box 1 include:•VAT on credit notes should be deducted•VAT on the full value of part-exchange goods should be included•assessments made by HMRC should be left outNotice 700/12, para 3.2Box 2: VAT due in the period on acquisitions of
Electronic invoicing
Electronic invoicingThis guidance note provides an overview of the requirements for businesses that will be issuing or receiving electronic invoices. Please see the UK VAT invoice requirements guidance note for more information on invoicing generally.Issuing electronic invoicesElectronic invoicing involves the transmission and storage of invoices by electronic means. The invoice is not printed and issued as a paper document. Electronic equipment includes (this list is not exhaustive): •wires•radio transmission•optical technologies•other electromagnetic technologySI 1995/2518, reg 13A(2); SI 1995/2518, reg A13; VATREC7000; Notice 700/63; VATA 1994, Sch 11, para 3(1)–(3); De Voil Indirect Tax Service V3.516, V7.427Issuing electronic invoices has certain benefits including:•improved order tracking and audit trails•decreased handling costs and less likelihood of invoices being lost by the recipient•increased speed issuing, accessing and retrieving invoices•quick dispute resolution and security•more environmentally friendly as uses less paper•saves storage space as not required to keep paper copies or scan numerous invoices•reduced postage costs•improved cashflow as the recipient receives the invoice on a more timely basisNotice 700/63, para 2.2Electronic invoicing is not mandatory and businesses can continue to issue and receive paper invoices.Businesses can also issue and receive invoices in both electronic and paper format. However, a business can only receive paper and electronic invoices for the same supplies whilst they are operating a trial of their electronic invoicing system. Once the trial has been completed the business must select one invoice method for supplies made and / or received.Businesses are not
VAT record keeping requirements
VAT record keeping requirementsThis guidance note provides an overview of the VAT record keeping requirements that VAT registered businesses should adhere to. These records will normally be requested by HMRC during a VAT inspection and will form the basis of the information that is included on the VAT return. The books and records maintained by the business must be kept up to date and made available if reasonably requested by HMRC. The books and records must be kept in a format which enables HMRC to easily check to the figures used to complete the VAT return.Required VAT recordsBusinesses are legally required to keep the following records. VAT accountThe VAT account is the link between the business records and the amounts included on the VAT return. It can also be referred to as a VAT summary. There is no prescribed format that must be used when preparing a VAT account; however, it must contain the following information:•total output tax due on sales split between standard-rated and reduced-rated sales•total output tax due on purchases of goods in Northern Ireland from EU member states (acquisition tax)•total VAT due under the reverse charge on the purchase of services from overseas vendors ― see the Reverse charge ― buying in services from outside the UK guidance note for more information•purchases of goods / services where the customer is required to account for the domestic reverse charge (eg certain supplies of gold, mobile phones, wholesale supplies of gas, electricity and electronic
Agricultural flat rate scheme (AFRS) ― operating the scheme
Agricultural flat rate scheme (AFRS) ― operating the schemeThis guidance note covers how to operate the agricultural flat rate scheme (AFRS). The scheme is sometimes also referred to as the famers’ flat rate scheme and the flat rate scheme for farmers.For an overview of the AFRS more broadly, see the Agricultural flat rate scheme (AFRS) ― overview guidance note.For in-depth commentary on the legislation and case law relating to the operation of the AFRS, see De Voil Indirect Tax Service V2.194 and V2.197.Operating the AFRS - the basicsA farmer operating the agricultural flat rate scheme (AFRS) does not recover input tax on their business costs. Instead, it charges a flat rate addition of 4% on its farming activities when it makes supplies to VAT registered customers. The farmer retains this addition, in effect compensating for the lack of VAT recovery.The VAT registered customer who is charged the flat rate addition may also recover this as if it were normal input tax.No VAT or flat rate addition is charged by the farmer on non-farming activities, although the level of these activities must be monitored as if taxable non-farming activities breach the VAT registration threshold then the farmer will need to leave the AFRS and register for VAT as normal.There are special invoicing requirements for a farmer operating the agricultural flat rate scheme (AFRS), including that the amount and rate of the flat rate addition are separately noted on the invoice.A flat rate farmer must abide by record keeping requirements and
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