Revenue have issued eBrief No. 49/2008 which advises of changes which have taken place in Revenue policy and procedures relating to VAT treatment of forfeited deposits and cancellation charges. These changes are to take effect immediately.

In summary, where the amount of a deposit paid to a supplier is retained owing to a cancellation by the customer and:

• a supply does not subsequently take place,
• the cancellation is recorded as such in the books and records of the supplier,
• the deposit is not refunded to the customer, and
• no other consideration, benefit or supply is provided to the customer by any person in lieu of that amount,

the supplier may reclaim any VAT already accounted for on such amount in the VAT return for the period in which the deposit is forfeit.

The changes were brought about by the ECJ decision, C-277/05 Sociéte thermale d'Eugenie-Les-Bains and were introduced into Irish legislation by FA08 s102.

The changes to the VAT treatment are reproduced at Section 2.06.