An advance payment, or deposit, is a proportion of the total selling price that a customer pays before you supply them with goods or services.

You can read more about Advance payments on the HMRC website linked below:

https://www.gov.uk/guidance/vat-instalments-deposits-credit-sales#advance-payments-and-deposits

Exceptions:

• In accordance with HMRC regulations, VAT declarations on supplier payments require a valid VAT invoice as evidence to be included on a VAT return. Consequently, Clear Books does not permit VAT to be declared directly on these payments. Instead, once an unallocated payment is linked to a VAT bill, the system automatically incorporates that bill into the VAT return based on the date of payment.
• VAT cannot be declared on receipts that have been partially allocated; it is only applicable to cash that remains entirely unallocated.
  

1. Advance payments on VAT cash accounting

If you create an unallocated receipt or payment, you can declare a VAT amount upon running a VAT return. Head to the Reports > All > Popular reports > VAT return menu and search for invoices on a new VAT return. 

The system will search for all unallocated payments within that period and direct you to the Declare VAT on payments page if VAT is yet to be declared on them.

If you declare a VAT rate which is different to that of the invoice you allocate to in future, the system will create an adjustment when you next run the VAT return to compensate if appropriate.

2. Advance payments on VAT invoice accounting

Advance payments need to be included on VAT returns. Head to the Reports > All > Popular reports > VAT return menu and run search for new invoices on a new VAT return. 

The system will search for all unallocated payments within that period and direct you to the Declare VAT on payments page if VAT is yet to be declared on them.

3. Automatic VAT Corrections

If you declare a VAT rate which is different to that of the invoice you allocate to in future, the system will create an adjustment when you next run the VAT return to compensate if appropriate.