Clause 22 - Disallowance of input tax where consideration not paid
Finance Bill
10:30 am
Mr John Burnett (Torridge and West Devon, Liberal Democrat)
The principle that credit for input tax should be adjusted if and to the extent that an invoice remains unpaid is entirely sensible and we support it. Despite the extra compliance burdens, we support the thrust of the clause. In other words, the purchaser or client who does not pay should not be entitled to the benefit of a value added tax credit in respect of tax that they have not paid. The clause places compliance burdens on the creditors who comply with the legislation, but there is a degree of uncertainty in the
proposals which I should like to address. Perhaps we can persuade the Government to introduce greater certainty.
The proposed six-month period runs from the later of the date of the supply or the date on which the sum becomes payable. There are two principal difficulties with that. First, the date normally recorded in the accounting records is the invoice date. As the Committee will know, the invoice may lawfully be provided up to 30 days after the time of supply or later if the commissioners permit. Secondly, the time when the consideration is payable is determined by the contract between the parties, and that is frequently a matter of custom. There is therefore a potential difficulty in identifying the expiry date of the six-month period.
A simple and straightforward amendment that the six-month period should run from the invoice date would be entirely sensible. It would add certainty for the thousands of business men who have to comply with the legislation and would avoid confusion. I look forward to hearing the appropriate Minister's comments on this basic, straightforward proposal.