Customer has asked for early invoice

[last of the summer wine]

Hi,

A customer has accepted an estimate for a job which will not be done until April but has asked us to send him the full VAT invoice dated before 31st March, and will pay 20% deposit on receipt of the invoice.

Presumably it’s so he gets the benefit of the input VAT on his March qtr return rather than having to wait until the June one - nice for him but I think it’s a bit cheeky as it would be the other way round for us.

If we agree I will make sure to state on the invoice that any extras incurred during the work will be invoiced separately, but is there anything we should be particularly aware of?

Thanks

 

[GLAbusiness]

Have look here https://www.gov.uk/guidance/vat-instalments-deposits-credit-sales#advance-payments-and-deposits

I think you are looking at an an invoice raised in March with you usual payment terms (28days?)

Your customer is not paying a deposit he is making an advance payment.

If is is a deposit you might want to invoice for the deposit separately.

It is probably a lot more complex than this -- discuss with your accountant

 

[last of the summer wine]

Thanks GLAbusiness. Our usual payment terms are on completion of the job, and for new customers we do sometimes ask for a deposit, which is invoiced in its own right at the time, with another invoice for the balance when the job is done.

So could we do as we would normally - invoice the deposit separately now and then issue the balance invoice on 31st March, (dated 31st March), instead of when the job would be finished sometime in April. He'd still be getting his invoices in his March quarter, which as I said previously is what I think he is after.

Thanks.

 

[pentel]

March 31st may be their year end and they want the expenditure in 2024 / 25 to either use up a budget or reduce the corporation tax payable for 24/25.

 

[Ian J]

Presumably it’s so he gets the benefit of the input VAT on his March qtr return rather than having to wait until the June one - nice for him but I think it’s a bit cheeky as it would be the other way round for us.

It isn't that cheeky as he is effectively paying the Vat for you up front with his 20% deposit.

I'm a few years out of date now but this used to be a common practice within the NHS and other Government departments as they had to spend their budgets or have them reduced

 

[Nathanto]

March 31st may be their year end and they want the expenditure in 2024 / 25 to either use up a budget or reduce the corporation tax payable for 24/25.

this used to be a common practice within the NHS and other Government departments as they had to spend their budgets or have them reduced

^ This. We would often get big orders in March simply because companies had "use it or lose it" budgets to spend.

In some cases it was doubly beneficial for the buyers as not only would they lose that money if they didn't spend it before April 5th but their allocated budget for the following financial year would be lower if they didn't use up their previous year's budget!