Change in
VAT treatment of forfeited deposits and
cancellation charges
SUMMARY
Changes have taken place in
Revenue policy and procedures relating to treatment
for VAT purposes on forfeited deposits and
cancellation charges. The provisions of these
changes are to take effect immediately.
IMPLICATIONS
The receipt of a deposit for the supply of goods or
services is treated as a supply for VAT purposes and
the VAT must be paid to the revenue for that VAT
period.
VAT treatment prior to change
•
Where the customer cancelled
their order/booking, the VAT that was already paid
to the revenue.
•
Relief from VAT was not available in respect of a
forfeited deposit.
New VAT treatment
•
There is no change to the
tax treatment of a deposit when it is received.
•
Where a cancellation occurs and the deposit
is retained, the deposit is treated as a
"Cancellation Charge" and is outside the scope for
VAT
• The
VAT paid on the deposit can be reclaimed.
What should you do.
• Claims for a refund of VAT
accounted for on forfeited deposits in prior years
should be submitted to your district tax office.
• The normal statutory
period of 4 years applies so this should be done as
soon as possible.
• Interest is payable by the
revenue on these refunds
