Early payment by customer: what is the time of supply?
I am confused by the tax point VAT rules or, to use the legislative phrase, the time of supply rules. Here are the facts.
- Our business supplied high-value goods to a UK customer on 27 June 2026, with a total value of £125,000 plus VAT.
- The customer wanted to ensure their June bank cash flow statement included these goods, so paid us the full amount owed on 30 June 2026, ie £150,000.
- We issued an invoice for £125,000 plus VAT on 3 July 2026.
My view is that the receipt of payment from the customer means that we must account for VAT on our quarterly return to 30 June 2026, but a colleague says that we can delay it until the September 2026 return because the invoice was issued within 14 days of the goods being supplied. Which is the correct route?
As a separate question, what is the relevant date on which our customer could claim input tax on their own returns?
Query 20,779– Dating Dan.
Debit and credit
A company client was subject to corporation tax instalment payments for the first time. The director was keen to avoid HMRC’s penal rate of debit interest, so we calculated the instalments on a prudent basis and filed the return shortly after the year end of 31 March 2026. I calculated roughly how much interest was likely to be due to the company on the overpaid instalments, and this was taken into account when the company paid its last instalment on 14 July.
I have recently noticed that, while the company’s account is in credit, it is also showing ‘debit interest still accruing’ and ‘credit interest still accruing’ and, because of the five point difference between the two rates, HMRC is nibbling away at the credit every day. I rang the advice line this morning and the adviser could not explain it – she suggested that I write in so that a higher officer could consider the matter.
It occurs to me that the credit interest has not been offset against the liability for interest purposes, so ‘the system’ still thinks there is a balance of tax outstanding on which it is calculating debit interest – but is that fair, or indeed right? And, given that ‘the system’ is not showing an amount due to HMRC, how do I stop it? I don’t know how much the company should pay. While I am waiting for HMRC to reply to my letter, I would be interested in the views of Taxation readers.
Query 20,780– Interested Party.
Should I stay or should I go?
I would welcome any assistance readers can provide on this scenario. A husband and wife owned a house as tenants in common. The husband died a few years ago and under his will he directed his half share into a life interest trust for the wife, which terminates absolutely in favour of his children on her death. The value of the house was circa £600,000, ie his half was £300,000. There was no inheritance tax (IHT) to pay on his estate due to the spouse exemption and so I understand that the value of his half share will not have been ascertained for tax purposes and no discount would have applied for IHT purposes.
The wife is still living in the house and consideration is being given to a sale and her moving into care. The house is now believed to be worth £750,000. I am trying to understand if capital gains tax (CGT) may be relevant to a sale pre-death or after she has died. She lives in the house, which is her only residence, and is entitled to occupy the half share in trust under its terms, so is not liable for CGT if it is sold now. If she dies and the house has not been sold, I believe there will be a tax-free uplift on both shares and so only if there is a subsequent gain will CGT be an issue. No discount will apply for IHT on her death, but the residence nil rate band should be available.
If this is all correct, there is no CGT to pay. However, I understand that the trustees’ acquisition value of his half share will be discounted by presumably 15%. Does that mean CGT could be due?
Query 20,781– Woody.
Is it a wind-up?
Our client is a loss-making company with four shareholders. Two of the shareholders each subscribed £40,000 for shares and claimed seed enterprise investment scheme (SEIS) income tax relief at 50%. They each hold 20% of the company. The remaining 60% is held by two unconnected shareholders who did not qualify for SEIS relief.
The company has two outstanding loan accounts of approximately £150,000 per loan, one due to one of the 60% shareholders and one to one of the SEIS shareholders. All the shareholders agree that the company is unlikely ever to be successful and there seems little point in keeping it going. The shareholders are considering winding up the company, although the three-year SEIS qualifying period has not yet expired.
I have advised the company that the winding-up or other disqualifying event within the three-year period would result in withdrawal of the SEIS income tax relief but that the loss arising on the SEIS shares may potentially be relieved against income under ITA 2007, s 131 rather than simply being treated as a capital loss. Capital loss relief should be available on the shareholder loans when those are formally written off in an insolvency.
Should any other options be considered? Would it make a difference if the company limps on for another year to meet the three-year SEIS deadline, even though it would lose money during that period? And is it possible for the company to start a new unrelated activity and still retain the SEIS relief? Or is it better for everybody to cut their losses now?
Query 20,782– Reece Truckdoor.
