Handling of VAT on deposits.

Modified on Fri, 3 May at 11:39 AM


As per HMRC – VAT must be declared on deposits at the time/date they are received. https://www.gov.uk/guidance/vat-instalments-deposits-credit-sales#:~:text=You%20must%20declare%20VAT%20on,the%20money%20you%20have%20received.

HMRC – VAT notice 7093



The way Hop deals with Deposits –

There is no VAT attached to the payment posted, however when the payment is posted to a Reservation/House Account with a future date – this is then picked up on the daily deposits ledger where the VAT is recorded for all the deposits received on that day.


The Deposits used reversal –

This is when the Deposits are redeemed – the VAT is reversed back out as it is recorded in the daily revenues posted and the reversal is to avoid double-recording.



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Example – 

A £500 deposit is taken today for a booking arriving 1st of July for 5 nights – the VAT (£83.33) is recorded today as due to HMRC – and will be included on the Company’s VAT Return for this period.


On the 1st of July when the booking arrives and checking in, the deposit is redeemed (£500 goes to Guest Ledger) and every Night Audit charges the £100 rate each night.

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