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Accepted deposits before VAT registration

Accepted deposit before VAT reg, will soon be registering, how do I account for these orders?

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Hi,

I'm close to the VAT threshold and will soon need to be registered. I'm stuck on how to deal with the deposits I've accepted on products before being registered. 
I sell pre-order retail products where some of them can be 5months to even 2 years until they release, I don't pay the distributors for any of the products until release date (this is where I'm stuck)
Some customers pay the 25% deposit (and the rest on release) some pay full in advance. I've reached out to HMRC VAT help online twice and got no response, it's now been two months. I anticipate I'll need to register for VAT after Xmas so I want to do it as soon as possible and much prefer to avoid a phone call. 
 

Thanks for any help. 

Replies (7)

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By zebaa
24th Sep 2021 11:16

Have you told your customers about vat ? If you have quoted a price that price is what the customer will pay.

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Replying to zebaa:
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By Mako
24th Sep 2021 11:28

I haven’t told my customers about VAT as my business boomed substantially over the last 6 months and to be honest never expected to hit VAT registration any time soon. I run an e-commerce store so my customers buy and checkout as normal with no mention of VAT.

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Replying to Mako:
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By zebaa
24th Sep 2021 11:38

Then you have a problem, as it is you who will have to pay the vat unless your quote mentioned it. If your customers are vat registered they may - note only may - agree to pay the extra vat amount as they may ( depending on how they account for vat) be able to offset this amount on their vat return. You need to understand this fully. For goodness sake get an accountant fast before you make an expensive mistake.

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Replying to zebaa:
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By Mako
24th Sep 2021 11:57

This is completely fine, I run a normal hobby shop to customers who wouldn't require VAT invoices. I know I'll lose a small amount (20% product from distributor to 20% from end sale will be a loss on my current pricing) but my mark-up covers me. What I'm unsure about is when the time comes to accept the final payment and I am VAT registered how do I record the sale, as when the sale was made I wasn't registered, but in the future on dispatch I am.

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By CJS88
24th Sep 2021 11:26

What does your accountant say?

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RLI
By lionofludesch
24th Sep 2021 11:41

You can't create a tax point before you're registered so these deposits are more than likely going to bear VAT if the supply of the goods is post-registration. Subject to anything you haven't mentioned.

Your accountant will help. If you don't have one, you'll need one and you'll also need some very careful record keeping - not just for money transactions but also dates of delivery of goods.

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Replying to lionofludesch:
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By Mako
24th Sep 2021 12:01

Thank you, I have all dates recorded through quickbooks on deposits accepted and balance payments. I will look into getting an accountant through quickbooks. I did think I'd be able to do this myself as I do have all the data, was just not sure how it got recorded.

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