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Is VAT payable if customers overpay a supplier who retains those amounts?
A client wishes to clarify their position with VAT on customers paying them excess funds. Their current terms read as follows.
‘If you send us money that you do not owe us such as an overpayment or a payment when there are no outstanding invoices then we will hold this as money on your account. You can ask for the credit balance on your account back at any time and as such we do not consider the payment to be an advance payment in respect of specific future goods or services (VATA 1994 s 6(4)). We do not pay interest on any credit balance. If we invoice you for any goods and services then we will at that point in time apply any credit balance on your account towards paying that invoice. To be clear your credit balance is not considered a pre-payment for...
