taxNews
Konnectplus
Kenya

VAT AND Deposits Where Is The Tax Point?

id : 105 Value Added Tax   
posted by : Admin
 DOQ : 2020-06-07 06:09:11
   Admin

WHAT HAS CHANGED?
HMRC has changed its approach to VAT on deposits. The change affects situations where a deposit has been paid, but not the actual supply required, i.e. a customer pays a supplier the required deposit and then does not require the service thereafter, through perhaps a cancellation or “no show”.

Up until March 2019, suppliers who retained deposits in these situations were not obliged to pay VAT on the amount retained. In these circumstances, the supplier would usually forecast the VAT payable and charge this on the deposit invoice (e.g. in securing the room at a hotel, or table at a restaurant), but if there was a no show could then pocket the VAT charged and not pay it to HMRC.

This practice of non-returnable deposits to secure a booking is not only prevalent in the hospitality industry, but also in travel and prestige goods. HMRC originally thought that as the actual supply had not taken place and importantly as VAT is a tax on consumption, nothing had been consumed, no VAT applies.ii

However, cases in the European Courts of Justice (ECJ), which are binding on the UK for the time being, ruled otherwise. These challenge the previous thinking, in that if a customer pays a deposit, to secure a reservation then despite not receiving the intended supply, the customer has received something akin to a “right of reservation”.


You may also like...

109_21040304.jpg

By John Muiruri Reviewed April 06, 2021 The difference between being an independent contractor

108_21040845.jpg

The Kenya Revenue Authority (KRA) on Monday suffered a blow after the High Court sitting in Nairobi
Court case: Treasury agreements aiding the rich evade paying taxes This claim is contained in a cou

106_20100718.jpg

106_20100718.jpg

KRA to collect Sh10bn more after raising tax. The government expects to collect an additional Sh10

103_20050450.jpg

103_20050450.jpg

Goods can be stored in a Custom Bonded Warehouse up to nine months without having to pay VAT or othe

100_20051237.jpg

100_20051237.jpg

Tax Laws (Amendment) Act 2020 (the Act) was assented to by the President on 25/05/2020. Key chang

my Views
(0)
taxBaddy.com @2014-2022 All rights reserved
Powered by : gravityworks@taxbaddy.com