VAT on deposits

VAT on deposits

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The company I work for takes a holding deposit to reserve a vehicle for a customer.

The vehicles are normally financed and the holding deposit is returned to the customer, less any RFL costs if appropriate, after delivery of the vehicle.

If they cancel an order for a vehicle we raise a cancelation invoice with the appropriate VAT on day of cancelation.

As such we have been treating as returnable deposit.

Should we be treating it as a forfeit deposit and pay vat on receipt of deposit and claim back when refunded? 

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chips_at_mattersey
By Les Howard
22nd Nov 2014 17:26

Deposit

I would expect that a deposit is a part payment, creating a tax point.  When the car is collected, then you make an adjustment so as not to over-pay VAT.

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By Stuart.thomson
22nd Nov 2014 19:29

Refund of VAT
What is the VATable supply on a cancellation? I am not convinced that the cancellation invoice actually attracts VAT.

With respect to non-cancelled transaction i agree with leshoward.

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