Careful Invoicing Can Benefit Cashflow.
Tax points vary depending on the nature of the goods or services being supplied.
For a company supplying actual goods, the tax point for the goods is the point at which ownership of the goods changes from the supplier to the customer or client. However, when a contract relates to the continuous supply of goods or services, and there is no clear finish date or end point, then output tax is only payable when an invoice is raised or receive payment (whichever is sooner).
Therefore, depending on where you are in your VAT quarter, a short delay (of not more than 14 days) in issuing sales invoices for high value goods or services could result in a three month cash flow advantage. For example, if a VAT return is due for the period ending 30th June, and goods are supplied on the 27th June, an invoice raised on 1st July rather than the end of June will mean that output tax need not be accounted for until the end of the following quarter.
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Author: Alan Taylor FCCA
A former pupil at Ripley St Thomas C of E High School in Lancaster, Alan joined Scott & Wilkinson directly from school in 1994 and qualified as an Accountant in 2001. Alan is the Partner with responsibility for the day-to-day...
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