If order placed before VAT increase (back to 17.5%), do I still pay 15%?

andyjjj

Hi guys

Tricky question...

For our wedding in August 2010, we will be securing the venue now by paying a £1000 deposit. At this point the VAT rate is 15%, but at the time of paying the full balance (about £9k) the VAT will be back up to 17.5%.

So the question is, would we pay just 15% for the entire order? or 17.5% as the order is for a service next year? OR would we pay 15% on the £1000 deposit, and then 17.5% on the remaining amount?

Anyone know??

Thanks!!

Baz_2

You will pay VAT at the rate that is in force on the day of the wedding. The deposit will be at 17.5% too, even if they treat that differently as it was 17.5% when you paid it.

Just make sure the price that you agreed did include VAT at 17.5% (It was agreed when the rate was 17.5% wasn't it?) and you get a discount should the rate remain at 15%.

You could, potentially ask them to bill you now, and then you pay the full price of the VAT at 15%. They could then disclose it as a sale at 15% now and the deposit you paid, i.e the full amount of the vat, they use to pay the vat man with. You would lock the rate in at 15% that way. the balance payable on the day. Whether they would agree to that is another matter, however the revenue would get there money early so I can;t see them being overly bothered.

JasonLVC

As the deposit is an advance payment for the supply of services, the venue has to declare VAT at the point the money is received, that means the deposit will be treated as 15% if recevied between now and December 01 2009.

When the remainder of the bill is due to be paid next year, then it will be at whatever the prevailing VAT rate will be at that time in the future, so lets say 17.5% for now.

Deposits can be a bit tricky. If the deposit is fully refundable at any time then there is an argument that the deposit is not for a supply for the future, but rarely are they such in reality. Nomrally, they are non-refundable. Arguably, if the deposit is non-refundable and the event does not take place, then technically this is a non-supply and VAT cannot be charged upon it all.