Q. My client is confused about how ‘tax points’ work. They understand the need to account for VAT when they make a sale, but do not know how to determine the exact date to report the VAT to HMRC. What are the rules for ‘basic’ and ‘actual’ tax points and how do deposits or invoicing affect this?

A. The time of supply - commonly referred to as the tax point - is the legal date when a transaction is treated as having taken place for VAT purposes. A VAT-registered business must account for VAT, at the relevant rate, in the prescribed period in which the tax point occurs. There can be a basic tax point and an overriding actual tax point.