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Advanced Payment and Deposit Tax Invoicing

Did You Know?

UK and EU VAT / Sales Tax rules mean that when you take a deposit or advanced payment for services, such as a stay in your property, that creates a tax point. This means you need to report the payment in the current VAT period and produce an invoice detailing the tax allocation. This can be quite complex, error prone and time consuming process.  Even more so if you have to deal with different Tax Rates for different invoice items. More information from HMRC


You take a booking in April for 1 room, 2 guests with breakfast for 5 nights starting in November at £630 and right now you take 50% deposit of £315. A tax point has been created and you need to report the receipt of £315 on your current VAT return and issue an invoice to the guest. 

Lets assume this is the breakdown of the chargeable services:
  • room rate : £96 * 5 = £480 (gross, inc VAT)
  • breakfast : £15 * 10 = £150 (gross, inc VAT)
How do you allocate the 50% or £315 deposit? In the UK it's not so bad as VAT rate on room and breakfast is the same at 20% but for some European countries the rates for rooms and breakfast differ making it quite complex and an invoice may also include other items like tourist tax.

We'll take the approach of allocating to the largest item first, in this case the room rate. So a deposit invoice will need to include :
  • room rate : £96 * 5 = £480 (gross, inc VAT), VAT @ 20%  =  £96, 
    • Payment allocated to this invoice : 
      • gross £315
      • VAT £52.50
      • Net £262.50
  • breakfast : £15 * 10 = £150 (gross, inc VAT), VAT @ 20% = £25
    • No payment allocated on this invoice as we have allocated all the deposit to the room. If we hadn't allocated all the deposit to the room then the remainder would need to be allocated to the breakfast charge as well.
And keep in mind if you have non-VAT items or different tax rate items this all needs handling.

How Does Guestbook 247 Help?

With full support for deposit or advance payment invoices. This takes out the pain of working out the correct VAT & producing an invoice for the customer. Added to that you can save deposit invoices for future review and the final balancing invoice will calculate the correct VAT.

If you need more than one advance payment invoice that's supported as well. Combined with Guestbook's invoice base rate templates and payment recording you have a system that really takes away the hassle and time of producing correct invoices.

Try it out with a free 30 day trial


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