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