TIME OF SUPPLY (Hansard, 11 July 1972)

§ Mr. Higgins
I beg to move Amendment No. 18, in page 6, line 15, leave out from second 'the' to end of line 20 and insert 'time of the removal'.
I understand that we can also take with it the following Government Amendments: No. 19, in line 23, at end insert: '(c) if the goods (being sent or taken on approval or sale or return or similar terms) are removed before it is known whether a supply will take place, at the time when it becomes 1457 certain that the supply has taken place, but not later than twelve months after the removal'. No. 20, in page 6, leave out lines 24 to 30.
No. 21, in line 30, at end insert: '(3) Subject to the following provisions of this section, a supply of services shall be treated as taking place at the time when the services are performed. (4) If, before the time applicable under sub section (2) or subsection (3) of this section, the person making the supply issues a tax invoice in respect of it or if, before the time applicable under paragraph (a) or (b) of subsection (2) or subsection (3) of this section he receives a payment in respect of it, the supply shall, to the extent covered by the invoice or payment, be treated as taking place at the time the invoice is issued or the payment is received. (5) If, within fourteen days after the time applicable under subsection (2) or subsection (3) of this section, the person making the supply issues a tax invoice in respect of it, then, unless he has notified the Commissioners in writing that he elects not to avail himself of this subsection, the supply shall (notwithstanding the preceding provisions of this section) be treated as taking place at the time the invoice is issued. (6) The Commissioners may, at the request of a taxable person, direct that subsection (5) of this section shall apply in relation to supplies made by him (or such supplies made by him as may be specified in the direction) as if for the period of fourteen days there were substituted such longer period as may be specified in the direction'. No. 22, in line 35, leave out from beginning to end of line 15 on page 7 and insert: '(8) The Commissioners may by regulation make provision with respect to the time at which, notwithstanding the preceding provisions of this section, a supply is to be treated as taking place in cases where goods or services are supplied for a consideration the whole or part of which is determined or payable periodically or at the end of any period or where goods are supplied for a consideration the whole or part of which is determined at the time when the goods are appropriated for any purpose; and any such regulations may provide—
(a) for treating goods supplied on hire for any period as being successively supplied on hire for successive parts of that period; and

(b) for treating services supplied for any period as being successively supplied for successive parts of that period.
(9) In this section "tax invoice" means such an invoice as is required under section 30(2) of this Act or would be so required if the person to whom the supply is made were a taxable person'. These important Amendments arise from questions about the tax point raised 1458 in Standing Committee on 25th May by my hon. Friend the Member for Dartford (Mr. Trew). The Amendments relate to the time at which goods and services are to be treated as being supplied for VAT purposes; that is to say, the tax point. They fulfil a promise made by the Government in Committee to review the tax point provision of Clause 7 before Report.
Their detailed effects are, first, to retain the basic tax point—that is to say, the date of removal from the supplier's premises and the tax point for services, the date of performance; secondly, to abolish the "three months rule" for the removal of goods; thirdly, to introduce a payments tax point for goods as well as services, in addition to a tax invoice tax point, if either of these events precedes the basic tax points; fourthly, to introduce a new rule, under which if a tax invoice is issued within 14 days after the tax point, the date of issue of the tax invoice becomes the tax point. That is the most important Amendment which we are making.
The fifth point is to allow the Commissioners to extend the 14-days time limit in cases where a taxable person can show that it is impracticable to issue tax invoices regularly within 14 days. The final provision is to introduce tax points for goods sent or taken on sale or return approval or similar terms.
I have gone through that rather quickly but, as I say, the important provision is the fourth one which will introduce a new rule under which if a tax invoice is issued within 14 days after the basic tax point, the date of issue of the tax invoice becomes the tax point. That was one of the points which was raised in Committee. We have sought to meet the points which were raised in Committee because we regard them as important. We have also received trade representations.
The important provision which I mentioned a short while ago means that in practice the issue of a tax invoice will become the normal tax point for money transactions.

§ Mr. Higgins
I am glad to see the hon. Member for Heywood and Royton (Mr. Joel Barnett) nodding in assent.
1459 The Amendments tend to make verification of taxable supplies more difficult and there may be some delay in collection. This minor disadvantage should be weighed against the fact that the Amendments overcome the practical difficulties foreseen by industry and commerce operating the previous proposals and achieve a worthwhile simplification.
Having considered this stage which was reached in Committee, we came to the conclusion that it was right to make these Amendments. They are rather complicated, but we went over the arguments in considerable depth upstairs and I do not imagine that the House would wish me now to go over the arguments for the Amendments but rather to explain exactly what they do.
The Amendments allow the invoice date to override the removal or performance date automatically if a tax invoice is issued within 14 days after the removal of performance date. Taxable persons will be allowed not to avail themselves of this provision—that is to say, to adhere to the removal or performance date if they prefer. They will also be allowed to apply to Customs and Excise for the approval of a longer period than 14 days if necessary. The need for this extension will arise in industries where it is necessary, for example, to await the receipt of invoices from suppliers and to negotiate prices for deliveries before the amount due can be invoiced to customers.
It is to be expected, however, that elections to adhere to the basic tax points and applications for extensions will be much fewer than the elections that would have resulted from the Amendments proposed in Committee and that this will thus avoid creating considerable extra case work because the 14-day provision will suit the majority of traders.
Following our discussions upstairs and the reasons I have now given, I hope that the House will feel it right to accept the Amendments.

§ Mr. Joel Barnett
This proves the usefulness of debates in Committee. The Amendment is a useful concession. As the hon. Gentleman rightly said, it represents an important change—indeed, it could prove to be very important if, as we suspect, there is in the not-too-distant 1460 future a change of rate upwards. Clearly, the invoice date becomes even more important when there is a change of rate. Be that as it may, I do not want to be over mischievous at this time. We shall have our opportunities later in the day. I am grateful to the hon. Gentleman for having looked into and accepted the various points we made in Committee.

§ Mr. Dalyell
As one of those who, in Committee, at some length put forward a case on behalf of the Scottish chartered accountants, I thank the Treasury for meeting the points made. However, I do not quite follow the final paragraph of Amendment No. 21, which reads: The Commissioners may, at the request of a taxable person, direct that subsection (5) of this section shall apply in relation to supplies made by him (or such supplies made by him as may be specified in the direction) as if for the period of fourteen days there were substituted such longer period as may be specified in the direction. Precisely to which direction are we referring to here?

§ Mr. Peter Trew (Dartford)
As my hon. Friend the Financial Secretary was kind enough to refer to me, I should like to say that the Amendments meet substantially all the points I made in Standing Committee and that I am most grateful to him.

§ Mr. Higgins
If the hon. Member for West Lothian (Mr. Dalyell) agrees, I will write to him about the point he raised.

§ Mr. Dalyell
Yes.

§ Mr. Higgins
This is a rather technical aspect and I will therefore seek to clarify it in writing.