Hi All
Hope someone can help with this query.
If we have a contract with a customer that says if they cancel a booking of an event and that we will therefore charge an amount as "liquidated damages". Do you expect this gets around HMRCs new policy to charge VAT on cancellation and no show charges?
https://www.taxadvisermagazine.com/article/changes-vat-treatment-retained-payments-and-deposits-1-march-2019
We understand that "Liquidated damanges" is a type of compensation for loss payment and therefore would be outside the scope of VAT.
Aside from this - I dont agree with HMRCs policy as there is no service being provided but that will likely take years to go through the legal system.
I just wonder if liquidated damages cannot be used instead of cancellation charges. Subject to clauses in the terms of conditions of course.
Thanks for your advice.
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