Last updated November 6, 2026
General information, not tax or legal advice. The rules depend on your country and your situation, so check anything with a tax or legal consequence with your accountant.
To invoice a deposit and final payment, issue two invoices with separate numbers: one for the agreed share when the deposit falls due, and one for the balance when the work is done. Each shows VAT on its own amount, and together they must add up to the quoted total.
How do you invoice a deposit?
A deposit invoice is an ordinary invoice for part of the agreed price. It needs the same details as any other, the next number in your usual sequence, and a line saying which job it belongs to:
Deposit: 30% of quote QUO-2026-0042, accepted 4 May 2026. Total job value €7,200.00 including VAT.
Agree the percentage before you invoice it. "30% on acceptance" written on the quote means the deposit invoice surprises nobody, and the guide to converting a quote to an invoice covers that step.
How do you invoice the final payment?
A final invoice bills what's left, in one of two common layouts. Balance only shows the remaining share as its line and mentions the deposit in a note. Full job less deposit lists the whole job, then deducts what was invoiced earlier. Customers often prefer the second because it shows the whole job on one page. The first is harder to misread, since the only total on the page is the amount to pay.
A worked example that adds up
Here's an invented example. A joinery firm quotes €6,000 plus VAT, at 20% to keep the arithmetic simple, with 30% due on acceptance and the balance on completion.
| Document | Net | VAT (20%) | Total |
|---|---|---|---|
| Quote QUO-2026-0042 | €6,000.00 | €1,200.00 | €7,200.00 |
| Deposit invoice INV-2026-0041, 30% | €1,800.00 | €360.00 | €2,160.00 |
| Final invoice INV-2026-0058, 70% | €4,200.00 | €840.00 | €5,040.00 |
| Invoices together | €6,000.00 | €1,200.00 | €7,200.00 |
In the full-job layout, the final invoice reads like this:
| Final invoice, full job less deposit | Amount |
|---|---|
| Joinery as quoted, net | €6,000.00 |
| VAT at 20% | €1,200.00 |
| Job total | €7,200.00 |
| Less deposit invoice INV-2026-0041, paid 12 May (net €1,800.00, VAT €360.00) | −€2,160.00 |
| Balance due (net €4,200.00, VAT €840.00) | €5,040.00 |
The VAT this invoice adds to your return is €840, not €1,200. Report €1,200 and you have paid the deposit's €360 twice.
Do you charge VAT on a deposit?
Yes, VAT is usually due on a deposit that counts towards the price. In the EU, Article 65 of the VAT Directive says that where a payment on account is made before the supply, VAT becomes chargeable on receipt of the payment and on the amount received. Article 220 requires an invoice for a payment on account from a business customer.
Countries can bring that moment forward (Article 66), so check yours. In the UK, HMRC's Notice 700 says most deposits are advance payments, and the tax point is the date you issue a VAT invoice or receive the money, whichever comes first (paragraphs 14.2.2 and 14.2.3).
"On the amount received" means a deposit you quoted as a round figure already contains its VAT. The sum is amount × rate ÷ (100 + rate), so a €1,000 deposit at 20% holds €166.67 of VAT and €833.33 net. Adding 20% on top of the €1,000 is the commonest error here.
Not all money taken up front is treated alike:
| Money taken up front | Usually treated as | VAT when received? |
|---|---|---|
| Deposit towards the price | Advance payment | Generally yes |
| Stage payment during the work | Part of the price | Generally yes |
| Refundable security against damage to hired equipment | Security, not payment for a supply | Generally no |
If the VAT rate changes between the deposit and completion, the EU default is the rate in force when VAT became chargeable (Article 93), which can leave two rates on one job. National transition rules can override that, so ask your accountant when a rate change lands mid-job. If the money arrives before you issue the invoice, the invoice should also show the date of the payment (Article 226).
How much deposit should you ask for?
A deposit should at least cover what you'd lose if the customer walked away after you started: materials you must buy, subcontractors you must book, other work you turn down. In the example above, €1,800 net makes sense if the firm has to buy €1,500 of timber before anyone arrives on site. Start from your own costs, then round to a percentage that's easy to write on the quote.
Can you ask for a deposit without issuing an invoice?
Yes, in many countries you can ask for a deposit with a payment request or a pro forma, which isn't a tax document. HMRC says a pro forma should be clearly marked "this is not a VAT invoice", and that it can't be used to reclaim VAT (Notice 700, paragraph 17.3). The real invoice follows when the money arrives.
This matters where issuing an invoice would itself create a VAT liability. An invoice sent in March and paid in May could otherwise have you paying VAT on a deposit you haven't received.
The mistakes that make deposit invoices go wrong
- VAT added to a VAT-inclusive deposit. Work out which figure the customer agreed to before you add anything.
- The whole VAT figure on the final invoice. Your return then counts the deposit's VAT twice.
- A final invoice that shows the job total as due. Some customers will pay exactly what the bold line says.
- No cross-reference. The final invoice should name the deposit invoice, so neither of you has to work it out a year later.
- Calling a deposit "non-refundable" without an agreement behind it. The word alone may not hold, especially with private customers.
For several stages rather than two, see progress billing. If a customer simply pays part of one invoice, that's a partial payment, and it needs no second invoice.
Invoicing a deposit and final payment in ERPFlow
ERPFlow has no deposit invoice type. A deposit is an ordinary invoice with an edited line.
Open the quote and choose Convert to invoice once for each stage. Every conversion makes a fresh draft of the whole quote, linked to it both ways, so edit that draft down to the stage's share before you issue it. Replacing the lines with one "Deposit: 30% of quote..." line usually reads best. The due date comes from the quote's payment term, and issuing gives the invoice its number and makes it final.
The full-job layout above isn't possible in ERPFlow, because a line can't go negative: the quantity must be above zero and the price can't be below zero. Use the balance-only layout and refer to the deposit in Notes, which print on the PDF:
Deposit of €2,160.00 paid on 12 May 2026 under invoice INV-2026-0041.
Record each payment against its own invoice. Tax rates apply per line, and tax reporting reads from the invoices themselves. ERPFlow doesn't decide when VAT falls due in your country and doesn't file your return, so tell your accountant if a deposit was invoiced in one period and paid in another. There's no pro forma document either, and customers can't pay a deposit online or accept a quote online: you mark the quote accepted yourself.