Can a UK Company Request a Deposit Before Starting Work?

Yes. A UK limited company can ask a customer to pay a deposit before starting work. UK businesses can generally set their own payment terms, including requesting payment upfront.

Deposits are commonly used for projects, professional services, custom orders and higher-value work.

How Does a Deposit Work?

A deposit is usually part of the total price paid in advance.

For example:

Project value: £5,000
Deposit: 30%
Paid before work starts: £1,500
Remaining balance: £3,500

The company and customer should agree the deposit terms before work begins.

How Much Deposit Can a UK Company Request?

There is no single standard percentage for every UK business. Common commercial arrangements might include:

25% upfront → 75% on completion

or:

50% upfront → 50% on completion

The appropriate amount depends on the project, costs involved and agreement with the customer.

Should the Deposit Terms Be in Writing?

Yes. The quotation, contract or invoice should clearly state:

• Deposit amount or percentage
• When the deposit must be paid
• When work will begin
• When the remaining balance is due
• Cancellation and refund terms

For consumer contracts, deposit and cancellation terms must also be fair. Excessive or automatically non-refundable deposits can potentially be considered unfair.

What About VAT on Deposits?

If the company is VAT registered, receiving a deposit can create a VAT tax point.

HMRC states that for most advance payments or deposits, the tax point is the earlier of when the company issues a VAT invoice for the advance payment or receives the payment.

Can the Deposit Be Non-Refundable?

Potentially, but the terms need to be considered carefully, particularly when dealing with consumers.

A business should clearly explain the cancellation and refund conditions before accepting the deposit. Consumer contract terms should be fair and proportionate.

Example Payment Terms

A UK company could state:

Project Price: £4,000
Deposit: 50% (£2,000) before work begins
Balance: £2,000 on completion
Payment Method: Bank transfer

This makes it clear what the customer must pay and when.

Final Answer

Yes, a UK company can request a deposit before starting work.

A typical arrangement might be:

Customer accepts quotation → 30% deposit paid → Work begins → Remaining 70% paid on completion

Deposits can help improve cash flow, cover initial project costs and reduce the financial risk of starting work before receiving payment.

For VAT-registered companies, remember that receiving a deposit will usually trigger VAT accounting on the amount received.

GOV.UK guidance on payment terms

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