There has been an anomaly in VAT law which new legislation has now largely resolved.
The problem with the old position
It has always been simple to correct calculable errors in tax invoices, such as price. A VAT debit or credit note would fix such mistakes. However, other errors such as an incorrect name or VAT number were legally insoluble. This is because the Act prohibits the issuing of more than one VAT invoice for a supply of a product or service. In terms of the law, a deduction for VAT is not allowed if there is an error (even a technical error) on the invoice.
An amendment to the VAT Act allows a corrected tax invoice to be issued. This needs to be done within twenty one days after the customer has requested a correction.
In addition, the vendor must keep an audit trail of the correction in case of a SARS query.
What has also been welcomed is that there is no change to the date of the transaction i.e. if the invoice was issued in January but corrected in February, the date the transaction is to be accounted for is still January.
An outstanding question and a checklist for you
This change to the VAT Act has brought certainty to an issue that has bedevilled business. One aspect that is still not clear is whether a business can issue a manual correction if its systems do not allow for an invoice to be electronically altered?
It is also worth remembering the legal requirements of a VAT invoice. They are that the invoice must contain:
- The words “Tax Invoice”, “VAT Invoice” or “Invoice”
- Name, address and VAT registration number of the supplier
- Name, address and, where the recipient is a vendor, the recipient’s VAT registration number
- Serial number and date of issue of invoice
- Accurate description of goods and/or services (indicating where applicable that the goods are second hand goods)
- Quantity or volume of goods or services supplied
- Value of the supply, the amount of tax charged and the consideration of the supply (value and the tax).
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)