As a general rule, most deposits made by customers serve as advance payments and create a VAT tax point when the deposit is received. It is important that businesses ensure that the VAT element of any deposits received is accounted for correctly. Usually this will mean that VAT is due on a deposit when it is received and not when the supply is actually made. VAT does not apply to some types of deposit. For example, a deposit received as security to ensure the safe return of goods hired out does not create a tax point. In this case the deposit would be refunded when the goods are returned safely or forfeited to compensate the supplier for loss or damage to the goods. HMRC’s policy in respect of the VAT treatment of retained payments and deposits changed from 1 March 2019. This change relates to businesses that retain payments and deposits for goods and services which customers do not take up. HMRC previously let businesses treat these payments as outside the scope of VAT where the customer did not use the service or collect the goods in relation to which a deposit had been paid. Following judgements of the Court of Justice of the European Union, HMRS’s new policy is that VAT is due on all retained payments for unused services and uncollected goods. This change clarifies the VAT treatment on payments for goods and services where there is an unfulfilled supply.