New HMRC policy for VAT on non-refundable deposits

Calculator with VAT Written on and Graphs in Background

On 1 March 2019, new rules come into force regarding the VAT charged on non-refundable deposits. Here’s what you need to know:


Current rules

The current HMRC policy lets businesses treat payments for services and part payments for goods, as outside the scope of VAT where the customer does not:

  • use the service
  • collect the goods

New rules

From 1 March 2019 the HMRC policy will be that VAT is due on all retained payments for unused services and uncollected goods. This is to bring consistency of VAT treatment on all payments for goods and services where there is an unfulfilled supply.

Where suppliers become aware that a customer has decided not to take up goods or services after paying, the transaction will remain subject to VAT. No adjustments or refunds of VAT will be allowed for those retained payments.


Credit card guarantees

Where credit card details are taken, but no payment will be taken until the service or goods are due to be used or collected, then VAT is due when the payment is taken.


Action to be taken

  • You may want to review your current VAT treatment of deposits to determine whether they will be affected by HMRC’s new policy and update your processes as necessary.
  • If you have a finance team, then ensure that they are aware of the change.



You can find more information about the new policy on the website.


Further information

If you found this information useful you may also want to check out the following:

Are you ready for Making Tax Digital for VAT?

Are you prepared for the 2019/20 payroll changes?

Avoid the mad march rush – get a head start on your tax planning

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