VAT and value shifting
Download the full outcome
Detail of outcome
This consultation sought views on a proposal to legislation to mandate methods for apportioning the consideration when items with different VAT liabilities are supplied together for a single price as part of a package or bundle.
The proposal is designed to prevent those businesses that seek to exploit the current non-prescriptive rules by apportioning less of the total bundle price to products that are subject to VAT standard rate than appears to be justified, given the normal price a customer would pay for those items if sold individually.
HMRC is actively engaging with stakeholders to gain a fuller understanding of the range of views on the proposals set out in the consultation.
HMRC has contacted all respondents to fully discuss their concerns about the proposals and would also like to engage with other stakeholders to establish their views. To this end, further representations will be welcomed. As part of this engagement HMRC will keep under review the changes proposed in the consultation.
Original consultation
Consultation description
This consultation seeks views on a proposed revision of the rules for apportioning the consideration between supplies with mixed liabilities in a single transaction.
The current law in section 19(4), Value Added Tax Act 1994 (VATA 94) is non-prescriptive and some businesses pay less VAT by apportioning more consideration (or ‘shifting the value’) to non-standard rated items.
Although the broad principles of the new rules are set, businesses can:
- comment on how these can be written into UK law
- draw attention to any issues the new rules present
- highlight whether greater clarity is required in some areas
Businesses are also invited to suggest other ways to tackle value shifting.
This consultation will be of particular interest to businesses that sell goods or services for a reduced price as part of a package or ‘bundle’.
Documents
Last updated 20 July 2021 + show all updates
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Published consultation outcome and summary of responses.
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A correction has been made to Section 4.1.2 and 2 example scenarios added to make the section clearer.
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First published.