The Value Added Tax Regulations 1995

Retention payments

89.  Where any contract for the supply of goods (other than for a supply to which subsections (7) and (8) of section 6 of the Act apply) or for the supply of services provides for the retention of any part of the consideration by a person pending full and satisfactory performance of the contract, or any part of it, by the supplier, goods or services (as the case may require) shall be treated as separately and successively supplied at the following times—

(a) the time determined in accordance with section 6(2), (3), (4), (5), (6), (9), (10) or (13) of the Act, as the case may require, and

(b) the earlier of the following times—

(i) the time that a payment in respect of any part of the consideration which has been retained, pursuant to the terms of the contract, is received by the supplier, or

(ii) the time that the supplier issues a VAT invoice relating to any such part.