Home For accounting professionals General accounting discussion
Current updates regarding coronavirus (Covid-19) and the precautions AAT are taking will be continually updated on the below page.

Please check this link for the latest updates:
We hope you are all safe and well and if you need us we will be here. 💚


VAT Threshhold and Refundable Deposits

Hi

I have a client who runs an event management business. They charge a damage deposit when hiring out equipment, if the equipment is returned in good order the deposit is refunded, if the equipment is damaged or not returned then the deposit is retained and used towards the cost of replacement. The business is not yet VAT registered but may get close some point this year. My understanding is that the deposit is 'outside the scope of VAT' because it is refundable, does this then mean that the deposit is also excluded when calculating the turnover to compare to the VAT threshold figure?

Many thanks
Sally

Answers

  • CeeJaySixCeeJaySix Well-Known Registered Posts: 645
    edited October 2016
    HMRC sum it up nicely:

    "VAT taxable turnover is the total value of everything you sell that isn’t exempt from VAT".

    "Returnable deposits

    You may ask your customers to pay a deposit when they hire goods from you. You don’t have to account for VAT if the deposit is either:
    •refunded in full to the customer when they return the goods safely
    •kept by you to compensate you for loss or damage"

    https://www.gov.uk/guidance/vat-instalments-deposits-credit-sales#2
    MarieNoelle
Sign In or Register to comment.