The best way to handle VAT on Deposits at the end of a Quarter that have not yet been used as part of an invoice is set out below:
If you are submitting a VAT return for Quarter 1 (e.g. Period 1 to 3)
Firstly you will need to set up a Deposit VAT Holding nominal to your balance sheet - for the process of setting up a new nominal code, please click here.
You will need to manually work out what your VAT on the deposits would be for that Quarter.
When the Quarter is closed you will need to do an Adjustment Journal in the closed period (e.g. Period 3). The VAT Output account would need to be credited with a VAT Category of Home so it is included as a payment to HMRC and debit the newly set up Deposit VAT Holding nominal.
This will ensure your VAT on deposits is included in your VAT return and this can now be submitted.
In Pinewood DMS when deposits are used against a sales (e.g. a Vehicle invoice) the VAT is calculated on the whole sale value (including the deposit) to ensure you don't pay the VAT twice you will need to reverse the Adjustment journal done previously. To do this:
Once the submission has been completed for the Quarter, you will need to reverse this in the open Quarter (e.g. Quarter 2).
You will need to do a Journal or Adjustment Journal in Period 4 (depending on whether it is closed or not). In the journal the VAT Output account with a VAT Category of Home will need to be debited; the reason for this is, for example, if you sell vehicles for all of those deposits it will add the VAT value for those deposits to the VAT Output account but as you have already paid these in Quarter 1 you have to reduce the VAT payment to HMRC by this value in Quarter 2.