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HMRC internal manual

VAT Time of supply

HM Revenue & Customs
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Actual tax points: payments: security deposits

Deposits may be required as security for the safe return of goods on hire or loan. These payments do not normally represent consideration for a supply and their initial receipt does not therefore create a tax point. If you require further information on what constitutes a security deposit you should consult the manual covering supply and consideration. A payment tax point can be created if, for example, hire charges are later off set against the refund of what was originally a security deposit. But only where this happens before the basic tax point on completion of the hire period.