Valuations

VAT tax point: when the tax falls due

The tax point decides which VAT return a supply lands in. On a construction certificate it usually follows invoice or payment. But the retention element has its own, later tax point, and treating it like the rest is a common slip.

QScope Team · 12 June 2026 · 6 min read

The tax point is the date a supply is treated as taking place for VAT. It decides which return the VAT goes in. On a construction certificate most of the figure and the retention element behave differently, and that difference is where certificates go wrong.

The ordinary tax point on construction work

For construction services the tax point is usually the earlier of two dates: the date the invoice is issued, or the date payment is received. Whichever comes first fixes the point at which the VAT is due.

So a valuation on its own does not create a tax point. The valuation establishes the amount. The tax point arrives when the invoice goes out or the money comes in, whichever is sooner.

A certificate values the work. It is the invoice or the payment, whichever is earlier, that fixes the tax point. Valuing work in one period and invoicing it in the next puts the VAT in the later period.

Retention has its own, later tax point

Retention is the exception. The tax point for the retention element is deferred. It does not fall at the date of the original valuation. It falls only when the retention is actually received, or when it is invoiced, whichever applies.

This matters because retention sits on a certificate for a long time. It is valued as part of the work now, but it is not paid now. It is held, and released later, often at practical completion and again at the end of the defects period. The VAT on that retained slice waits with the money. It becomes due when the retention is received or invoiced, not back when the work it relates to was first valued.

Do not account for the VAT on retention when the work is first valued. The retention tax point is deferred to receipt or invoice of the retention itself. Bringing it forward to the original valuation date accounts for the tax early, on money that has not been paid and may be months away.

How the two combine on one certificate

On a typical interim certificate the figure splits, for tax point purposes, into two parts. The part being paid now follows the ordinary rule, the earlier of invoice or payment. The retention part waits for its own later tax point, keyed to when the retention is received or invoiced.

A certificate that treats the whole figure as having a single tax point at valuation gets the retention wrong. The cleaner approach is to keep the retention element on its own release date, so that when release comes, the tax point for that slice comes with it.

Where the reverse charge changes who, not when

Where the domestic reverse charge applies, the customer accounts for the VAT rather than the supplier. That changes who reports the VAT. The customer accounts for it in its own tax point. It does not remove the idea of a tax point, and it does not change the retention deferral. The retention element still waits for its own point, it is simply the customer, not the supplier, who then accounts for the VAT on it.

The check on the retention line

Is the retention element carried on its own release date rather than folded into the paid figure?
Has the VAT on retention been left until the retention is received or invoiced?
For the part paid now, is the tax point the earlier of invoice or payment?
Where the reverse charge applies, is it clear the customer accounts for the VAT at its own tax point?

If the retention keeps its own date and its VAT waits for release, the tax lands in the right return. The rest of the certificate follows the ordinary rule, and the two never get confused with each other.

QScope does this part for you

QScope holds retention on its own release date, so you can see when the retention element becomes payable and, with it, when its tax point arrives.

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