A: Only income with a time of supply (tax point) dated while VAT registered is subject to VAT. Under the tax point rules the basic tax point for a supply of services is when the service is performed or completed and the only thing that may still be required is the issuing on an invoice (para 14.2.1 of VAT Notice 700). The basic tax point is therefore pre-registration as the services were completed before VAT registration. A basic tax point is however overridden by an actual tax point (para 14.2.2 of VAT Notice 700). An actual tax point is created if you either receive payment before the basic tax point or issue a “VAT invoice” before, or up to 14 days after, the basic tax point (to the extent of the amount received or invoiced). Since the client was not paid anything in advance and the invoice issued was not a VAT invoice (a VAT invoice cannot be issued by a non-registered trader) the time of supply has not moved from the basic tax point. As a result, no VAT is due on this payment since the service completion and tax point is pre-registration.
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