vat on deposit

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25euronote

Registered User
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a client sent over a deposit for work to be done. should vat be applied to this receipt in the current period, or do i wait until the job is done and get final payment.
the vat rate is 13.5%

thanks
 
Hi

Payment of a deposit is a prepayment for the supply of the goods or services to which it relates, and the supply of those goods or services for a consideration equal to the amount of the prepayment is deemed to have taken place. Where such supplies are taxable, tax is chargeable on the deposit under Article 65 of Directive 2006/112/EC (the VAT Directive) and section 19(2) of the Value Added Tax Act 1972, as amended.

So I believe VAT is due when you receive the deposit. This is even if you have yet to invoice the customer and you are on an invoice basis.

However if the order is cancelled the deposit is not refunded and no service is therefore supplied then it falls outside the scope of VAT and no VAT is chargable.

Regards

capnhand
 
Also important to be aware that an income tax / CT adjustment will be needed if you are reversing VAT previously accounted for on a deposit... (€123 which was 100 + VAT becomes €123 of net income).
 
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