Customer Deposits to create customer prepayments in Xero
The 'Prepayment' type of money receipt exists in Xero in order to correctly account for VAT (and other sales taxes) which need to be recognised as payable when the business takes a receipt from a customer for services to be rendered.
The 'customer deposit' taken against a quote in Dear gets coded as a 'money received' in Xero rather than a 'prepayment' (through the Dear/Zero integration).
This means that none of the deposit transactions correctly account for the UK VAT when the deposit is taken.
This means that VAT is only paid when the final invoice is issued.
Effectively this coding error (or lack of flexibility) is causing UK businesses to pay 'VAT on deposits received', too late. Thereby exposing them to penalties for mis-filed tax reports.