VAT on forfeited deposits

Change to HMRC policy

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Client hasn't been reclaiming VAT paid on retained deposits. I'm aware of the looming change from 1 March 2019 meaning that VAT will be due on deposits forfeited, however can my client make a claim prior to 1 March 2019 for the previous four years?

Guidance at https://www.gov.uk/government/publications/revenue-and-customs-brief-13-... states:

6. Previous VAT periods

Businesses that have not treated payments for unfulfilled supplies as outside the scope of VAT have applied the law correctly. They cannot make any adjustment to previous VAT periods to treat supplies in line with former policy, as no error has been made.

Does this mean no adjustment can be made now, or after the 1 March 2019 change? It's a bit vague.

Replies (3)

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chips_at_mattersey
By Les Howard
13th Feb 2019 22:50

If the client makes a claim, HMRC will evidently challenge it. However this represents a retrospective liability change, which is wrong I think.
Is your client ready for a fight?

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Replying to leshoward:
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By the_drookit_dug
13th Feb 2019 23:01

Think they're more of the 'no harm in trying' mindset.

Could HMRC not challenge it on unjust enrichment grounds alone?

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By Wanderer
14th Feb 2019 01:16

As always with HMRC it's vague. Could it be argued that:-
If you make the adjustment NOW, before 1 March, the CURRENT policy is that you can treat as outside the scope.
If you consider making the adjustment on or after 1 March the policy then will be that you can't make the adjustment.

After all the brief does start with "This brief explains HMRC’s new policy on VAT and payments for unfulfilled supplies which applies from 1 March 2019."

Also in the hotel example case it says "If the customer cancels the booking before 1 March 2019, the hotel may make an adjustment and treat the £20 VAT as outside the scope of VAT."

One's got to ask why they have made the change from a future date. Why not say immediately from the date of the brief?

I'd say it's worth a try.

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