VAT on Deposit Payments
From March 2019, HMRC have new legislation which they are now using to recover VAT on deposit payments in circumstances where the customer has not completed the sale but equally has not requested the repayment of the deposit.
In these circumstances the dealer may well have accounted for the VAT on the deposit and then recovered the VAT when treating the deposit as income.
The Revenue are asking a series of questions as per below:
- 1. Please clarify whether your business retains payments or deposits in relation to unfulfilled supplies.
If it does, please proceed to question 2. If it does not, then there is no need to answer the other questions.
- 2. Did your business treat such amounts as being outside the scope of VAT (in line with our Policy) prior to 1 March 2019?
If it did, please answer questions 3, 4 and 5. If it did not, please answer questions 4 and 5.
- 3. What was the total amount retained by the business in respect of unfulfilled supplies for each of the last two years?
- 4. Is your business applying the new Policy? In other words, is your business now accounting for VAT on all retained payments for unused services and/or uncollected goods?
If not, how is the business treating such payments and why? Please provide details.
- 5. Have your business arrangements been altered (or is it intended that they will be altered) because of the new Policy?
If so, please provide the details.
If you have received a request from HMRC or are aware that you have received VAT / not paid VAT on deposit income which you have taken to profit.