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VAT on deposits and commission on sale of property

When should VAT be recognised on commissions & deposits for the sale of both UK & overseas property

Our client, company A, is a UK VAT registered company which introduces customers to property developers based in the UK.

Company A will charge the property developers commission once the sale of the property has been completed. These commissions include VAT.

There are 4 possible scenarios here:
A UK based customer purchasing a UK property.
A UK based customer purchasing a Dubai property.
A Dubai based customer purchasing a UK property.
A Dubai based customer purchasing a Dubai property.

Company A receives reservations from all customers. These reservations are held by Company A as a liability until the sale of the property is either completed or falls through.

If the sale is completed, the reservation fee is refunded to the customer. If the sale falls through, the reservation fee is non-refundable to the customer. This is detailed in the contracts.

Once a reservation is considered non-refundable, it is realised as sales. The issue here is determining whether there should be output VAT on the reservations once they are recognised as sales.

Also, the treatment is likely to be different depending on each of the 4 scenarios above.

Could someone please advise me of the correct VAT treatment for each scenario.

Thank you.


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21st Feb 2019 12:45

So, you are asking the community to advise the VAT treatment on 4 different situations, each with two outcomes, eight scenarios in all.

You may get a better reaction if you outline your own thoughts first having done your own research and then let the community comment.

Thanks (1)
to Wanderer
21st Feb 2019 13:04

Yes, I suppose the answer would consist of 8 outcomes overall. Is this a problem?
So, you don't have an answer to my query. The post has only been up for a couple of hours. Think I'll reserve judgement on the reaction for now.

Thanks (0)
to RonBlanco
21st Feb 2019 13:20


So, you don't have an answer to my query.

Actually I do and could point you towards HMRC guidance, case law and a change of HMRC policy on deposits recently published that's effective 1 March together with my own experience, all of which could assist you.

If however, you can't be asked, then at present, nor can I.

Thanks (1)
to Wanderer
21st Feb 2019 13:23

Brilliant. So instead of providing an answer initially, you decided to rubbish my post. Perhaps you enjoy wasting your own time.

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to RonBlanco
21st Feb 2019 13:29

Actually I was giving you some good advice bearing in mind my experience of accountingweb coupled with my 7 years membership and your, how long is it, ah yes less than a day.

Thanks (2)
21st Feb 2019 17:38

The Place of Supply rules mean that, if the property is located in the UK, UK VAT will apply.
Where the property is located outside the EU, there is a provision which allows recovery of input tax under s26(2)(b).
There may be other options to structure the transactions, but that will depend on the nature of the properties (commercial, residential), and what developers will do with them.

I cannot comment on possible Dubai VAT issues, so you will need to seek separate advice on that one.

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