How do I account for and invoice VAT on deposits

50% deposit is paid on order. The balance is paid in installation. Do I need two invoices?

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Currently we receive 50% deposit on order and balance on installation.  We produce only the one invoice on installation that shows the deposit already paid and balance to be paid.  HMRC require that we account for the VAT on the deposit.  Please advice the correct invoicing procedure.  I presume we should invoice for the deposit at the time it is received and to include VAT.

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By tom123
16th Dec 2016 09:39

You should raise an invoice, with VAT, for your deposit. The credit for this is something like deferred revenue, released to P&L on completion of the job.

The receipt of the money creates a 'tax point' from a VAT perspective.

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By swatt66
18th Dec 2016 11:37

The VAT is determined by the tax point (which is a point in time determined by an event or events). You need to determine your tax point.
It can be there are tax points occurring when you receive funds at stages of completion and in this can you would need to issue VAT invoices each time funds are received.

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