04 June 2019 
Andrea Marshall, Tax Specialist
A reminder that the VAT treatment of non-refundable deposits changed on 1 March. Where a customer pays a deposit and has no entitlement to have the deposit repaid if they don't use the goods or services, then the deposit will now follow the VAT liability of the unfulfilled supply, rather than being treated as an outside the scope compensation payment. HMRC has changed the policy following CJEU judgements which stated that the payment was consideration for a supply when the payment was made, and it cannot later be reclassified as being compensation for the supplier even if the supply does not take place.
This means that where deposits are taken for standard-rated supplies such as conference centres, or vacation accommodation (where this is treated as taxable), any deposits retained when the supply itself doesn't take place must remain as standard-rated, where they may previously have been treated as outside the scope of VAT.
