Autumn Budget 2018 – VAT on unfulfilled supplies

The government is concerned that prepayments for goods or services which are never delivered to the customer are resulting in VAT being collected by the would-be suppliers but not being paid to HMRC.  For example, where no supply is made, there is no taxable transaction.

Effective from 1 March 2019, all prepayments for goods and services will be brought into the scope of VAT where customers have been charged VAT but have failed to collect what they have paid for and have not received a refund.

This will affect those who agree to make supplies and receive prepayments from their customer, but the supply is never made.