I am looking for clarification on the VAT treatment of charges for cancellation of a contract. I understand that HMRC have changed their policy on VAT and payments for unfulfilled supplies from 1 March 2019, as set out in Revenue and Customs Brief 13 (2018). The Brief outlines that from 1 March 2019 HMRC policy will be that VAT is due on all retained payments for unused services and uncollected goods.
Where a business sells tickets for an event but, under its T&Cs, it allows the customer to cancel and receive a refund, less a cancellation charge. Is the cancellation charge now subject to VAT under this new policy?