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bigduckontax, Accountant
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Is VAT declarable if you have only received a deposit on an

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is VAT declarable if you have only received a deposit on an invoice?>

Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.

If you have received income which will bear VAT in the long term, and a deposit on an invoice is exactly that, then you must slice out the VAT element and post it in your output tax ledger heading on receipt. I ran an exhibition company once and those booking stands made a deposit. I then raised the invoice for the stand, adding VAT and then deducting the deposit from the sub-total. The deposit was posted to the books of account as follows [say a GBP 120 deposit with the prevailing rate of VAT 20%]:

Debit Bank/Cash 120; Credit, Stand Rentals 100 Output VAT 20.

I do hope that my reply has been useful.

bigduckontax and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

Thank you.

If I explain the exact situation you might be able to clarify further.

We sold a large piece of equipment to a customer. He made a deposit to secure the equipment assuring us that he would settle the balance within a week. 1 month later he had not paid so I secured hire purchase finance for his and credited the initial invoice and raised a further invoice to the finance company. However because he did not pay the initial payment for a further month, the finance company asked me to credit the invoice again and raise a final invoice in November. This was a vat quarter later than when the initial invoice was raised. The HMRC are claiming that I should have declared all the output VAT in August the date when the first invoice raised. I declared it in the November the date when the final invoice was raised and settled. ??

Unless your organisation is using the cash accounting system [unusual for a big business] ie VAT paid on each cash receipt, I regret to have to tell you that the line taken by HMRC is correct.

I know it is a bit of a pest from a cash flow point of view, but I regret that is how VAT works.

I am so sorry to have to rain on your parade.

I am sorry if I misled you in my original answer. I should have mentioned that exhibition company I was running was on cash accounting.
Customer: replied 2 years ago.

thank you - not what i wanted to hear but at least you clarified it for me.


Thank you for your support.

Always bear in mind Benjamin Franklin's dictum that in life there are but two certainties, death and taxes!