The measure will bring pre-payments for goods and services into the scope of VAT where customers have been charged VAT but have either failed to:
It will not apply in circumstances where prepayments have been made and customers receive a refund.
Suppliers who receive pre-payments for their goods and services.
The rules will be amended from 1 March 2019.
The objective of this policy measure appears to be ensuring that where a business has charged VAT on a pre-payment but does not fulfil the supply, it cannot make an adjustment to its VAT account such that the VAT is not paid to HMRC and the amounts collected from the customer are retained.
Head of Tax Policy & Indirect Tax Policy Lead