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VAT treatment of retained payments and deposits

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From 1 March 2019, HMRC will treat VAT as due on all payments for goods and services which customers pay for, but do not collect or use.

If the supply does not take place, the VAT must not be reduced unless the payment is refunded. Where suppliers know the relevant goods or services will not be used or received before 1 March 2019, they may apply HMRC’s current policy, which allows businesses to treat many retained payments as outside the scope of VAT.

This change in policy follows the CJEU judgments in Air France-KLM and another [2016] STC 1451 and Firin OOD [2014] STC 1581.

See Revenue and Customs Brief 13/2018.

Issue: 1426
Categories: News , Indirect taxes , VAT
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