H M Revenue & Customs changes its policy on deposits from 1st March 2019

H M Revenue & Customs recent business brief has indicated a change in policy with regards to the accounting of VAT on customer deposits, from 1st March 2019, where a customer deposit is retained but goods or services weren’t provided or performed, for example an order is cancelled before the service or goods are supplied.

The current policy from H M Revenue & Customs is that in some situations where a deposit is retained but no service is performed the business doesn’t have to account for VAT on the receipt because there has been no VAT-able supply. The new policy has removed any doubt as VAT is to be applied to all deposits retained by a business.