Do i charge VAT on a refundable deposit

[gritbinsales]

Hi all,

Do i charge VAT on a refundable deposit and if so does the refund include the VAT i charged

the set up i am using on my webpage charges VAT

thanks Adrian

[luvbusiness]

Someone might be able to answer your question in the accounts and finance section

[David Richards]

Do i charge VAT on a refundable deposit and if so does the refund include the VAT i chargedI'm assuming that this is a deposit left by someone hiring one of your grit bins - which you keep if they don't return it or if it's damaged.

In that case, you don't charge VAT on the deposit. The HMRC guidance (http://www.hmrc.gov.uk/vat/managing/special-situations/instalments.htm#2) says;

You may ask your customers to pay a deposit when they hire goods from you to make sure they bring the item back safely. No tax point is created - and 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