A tax point for VAT is the date HMRC treats a VAT-registered business as making a supply of goods or services, and it decides which return period the transaction falls into and which VAT rate applies. A single sale can carry four dates — order, delivery, invoice, and payment — so the rules pick one and make it the only date that matters. In most cases the tax point is the earliest of delivery or completion, the date a VAT invoice is issued, or the date payment is received, with specific overrides for deposits, continuous services, and invoices issued shortly after delivery.
The Basic Tax Point
The basic tax point is the default date, used when nothing earlier has already fixed the tax point.
For goods, it is the date they are removed — the date the supplier delivers them or the buyer collects them.1HM Revenue & Customs. VAT Time of Supply – VATTOS3500 – Identifying a Tax Point: The Basic Tax Point Where the goods do not physically move, such as immovable property or a chain supply, the basic tax point is the date they are made available to the customer.2GOV.UK. VAT Act 1994 Section 6(2) – Basic Tax Point (Goods)
For services, the basic tax point is the date the work is completed, meaning the moment the services have been fully performed apart from any outstanding invoicing.1HM Revenue & Customs. VAT Time of Supply – VATTOS3500 – Identifying a Tax Point: The Basic Tax Point For a one-off job like a boiler repair or a final consultancy report, completion is straightforward. Ongoing arrangements follow separate rules, covered below.
When Invoices or Payments Override the Basic Tax Point
If a VAT invoice is issued or a payment is received before the goods are delivered or the services are completed, that earlier date becomes the tax point for the amount involved.3GOV.UK. VATTOS3600 – Identifying a Tax Point: The Actual Tax Point This is the rule that catches most businesses out: sending an invoice early or taking a payment in advance pulls the VAT obligation into an earlier return period than the delivery date would suggest.
Deposits and Advance Payments
Deposits and advance payments create a tax point the moment the money is received or a VAT invoice is issued for them, whichever is earlier.4HM Revenue & Customs. VAT: Instalments, Deposits, Credit Sales The VAT on the deposit goes on the return covering that period. If the customer later pays the balance before delivery, that generates a second tax point for the balance, again at the earlier of invoice or payment.
Forfeited deposits still carry VAT. If a customer puts money down and then walks away, the business must still declare VAT on the deposit as of the date it was received or invoiced.4HM Revenue & Customs. VAT: Instalments, Deposits, Credit Sales A cancelled order does not erase the VAT already triggered on the advance payment.
The 14-Day Rule
Where a VAT invoice is issued within 14 days after the basic tax point, the invoice date replaces the basic tax point as the date of supply. This sits in Section 6(5) of the VAT Act 1994.5GOV.UK. VAT Time of Supply – Actual Tax Points: VAT Invoices: The 14 Day Rule For most businesses this is helpful, because the tax point then follows the normal billing cycle rather than the delivery date.
One point to watch: the tax point created by the 14-day rule covers the full value of the supply, even if the invoice only covers part of it. Deliver £10,000 of goods and invoice £6,000 within 14 days, and that invoice fixes the tax point for the whole £10,000, unless the remaining £4,000 was already caught by an earlier deposit or invoice.5GOV.UK. VAT Time of Supply – Actual Tax Points: VAT Invoices: The 14 Day Rule
Extending the Window
If 14 days is not enough, a business can apply in writing to HMRC for an extension under Section 6(6) of the VAT Act 1994. HMRC grants extensions only where the business cannot realistically invoice within the standard window; preference or convenience is not enough, and extensions beyond three months are permitted only in exceptional circumstances.6GOV.UK. Actual Tax Points: VAT Invoices: Extensions to the 14 Day Rule
If an extension is granted and the invoice still is not issued within the approved period, the tax point reverts to the original basic tax point rather than the end of the extended window.6GOV.UK. Actual Tax Points: VAT Invoices: Extensions to the 14 Day Rule That can push the transaction back into a return period already filed, forcing an adjustment.
Continuous Supplies of Services
Utility contracts, long-term leases, and multi-year consultancy agreements have no single completion date, so the basic tax point rules cannot apply in the usual way. Under Regulation 90 of the VAT Regulations 1995, the tax point for each portion of a continuous supply is the earlier of a VAT invoice being issued or a payment being received.7GOV.UK. VATTOS9155 – Tax Points for Specific Types of Supply: Continuous Supplies of Services Each invoice or payment during the life of the contract generates its own tax point.
Construction projects with stage payments work this way. A contractor invoicing at foundation, roof, and fit-out stages creates three separate tax points, one per invoice or payment, whichever comes first.
Sale or Return
Goods sent on sale or return, on approval, or on similar terms follow a modified basic tax point. Since the goods leave the supplier before anyone knows whether a sale will happen, the tax point is delayed until the customer adopts the goods. If the customer has not adopted or returned them within 12 months of removal, a tax point is triggered automatically at the 12-month mark.8GOV.UK. VATTOS9550 – Tax Points for Specific Types of Supply: Sale or Return Adoption can mean using the goods, selling them on, or keeping them past an agreed trial period.
Pro Forma Invoices Do Not Create a Tax Point
A pro forma invoice is not a VAT invoice, and issuing one does not create a tax point. The normal tax point rules continue to apply.9GOV.UK. VATREC9020 – Can a Pro Forma Invoice Be Used to Account for VAT? A customer who receives a pro forma cannot use it to reclaim input tax either. Once payment is received or the supply takes place, the supplier must issue a proper VAT invoice within 30 days.
Penalties for Getting the Tax Point Wrong
Misidentifying a tax point can push a transaction into the wrong return period, triggering both late-submission and late-payment consequences.
Late Submission Penalties
HMRC uses a points-based system for late VAT returns. Each late return earns one penalty point. Once a business hits its threshold, it receives a £200 penalty, and every further late return at the threshold triggers another £200.10GOV.UK. Penalty Points and Penalties if You Submit Your VAT Return Late The threshold depends on filing frequency:
- Annual filers: 2 points
- Quarterly filers: 4 points
- Monthly filers: 5 points
Late Payment Penalties
If the timing error also means VAT was paid late, a separate structure applies. There is no penalty for payments up to 15 days overdue. Between 16 and 30 days overdue, the first penalty is 3% of the VAT outstanding at day 15. At 31 days or more, an additional 3% is charged on whatever remains outstanding at day 30, plus a daily penalty accruing at 10% per year on the unpaid balance from day 31 onward.11GOV.UK. How Late Payment Penalties Work if You Pay VAT Late
Late Payment Interest
HMRC also charges interest on overdue VAT at the Bank of England base rate plus 4%. As of January 2026, with the base rate at 3.75%, the late payment interest rate is 7.75%.12HM Revenue & Customs. HMRC Interest Rates for Late and Early Payments Interest runs from the first day the payment is overdue until it is paid in full,13HM Revenue & Customs. Late Payment Interest if You Do Not Pay VAT or Penalties on Time and moves whenever the Bank of England adjusts the base rate.