VAT for Deposit

Hello! Kindly ask you to help us with a current situation: We are a company registered in the UK, and we are also registered for VAT purposes. We have issued an invoice for a deposit to a client located in the UK and have charged them 20% VAT on the deposit amount because the services will be consumed within the UK territory in the future. If the invoice is not paid by the end of the quarter, should we include the amount of this invoice and the VAT in the tax declaration for the period and pay the tax? No services have been provided to the client; this is an invoice for a prepayment that the client will use in the future. The client may never pay this invoice.

Hi. If the deposit is an advance payment then it will create a tax point when you receive the payment and so if the payment is never received then no tax point is created. Please see the guidance below,sec 14.2.3 See : VAT guide (VAT Notice 700)   . Thank you .

 

Thank you very much for your reply and the link! Highly appreciate!