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VAT ON PREPAID SERVICE

Hi.

I just have a question regarding VAT.

My client has just been registered for Vat and the 1st return is end of Jan 2012. They operate a private hire business (minicab service). They are agents and only have to pay VAT on the commissions they earn.

They take lots of advance bookings which are paid  at the time boking  with credit or debit card.

I am stuck on an issue.  I was told that we have to pay the VAT on the day the credit card is charged, even if the journey is carried outside the 3 months period the VAT return covers.

These all assume that we know commission we will earn if the job is carried out as it is booked.  This is not always the case. The job might get cancelled or there is additional drops etc.

Questions:  Can we pay the Vat only once service is carried out (for the journeys paid prepaid).

Thanks for your help in advance.  Happy New Year to everyone.

Manzar

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By neileg
29th Dec 2011 12:47

Tax point

The tax point is the earliest of:

- The date of payment

- The date goods or services are supplied

- The date a VAT invoice is raised

So you have been correctly advised, if the fares are prepaid then the VAT liability is triggered on the date of payment.

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By squay
29th Dec 2011 14:25

Tax Point 2

I agree with neileg and would add that if the amount for the job eventually changes (creating a second tax point)  or is cancelled then you would account for vat on the difference from that already declared whether it is in the same period or a later one. In your circumstances it would appear to make no difference whether you are using the standard or cash accounting vat basis.

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