VAT: supply splitting tax avoidance schemes (Spotlight 38)
Published 26 June 2017
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Overview
HM Revenue and Customs (HMRC) is aware of attempts to avoid VAT by splitting a single supply of goods or services into separate supplies.
This results in a lower rate of VAT on each separate supply than on the single supply, and is classed as supply splitting.
VAT supply splitting
HMRC view all VAT supply splitting arrangements that have been designed to reduce the amount of VAT owed as tax avoidance.
HMRC consider that such arrangements should be taxed as a single supply where:
- multiple suppliers are used where the same elements could be provided by one supplier
- the customer has no opportunity to decline to take one of the individual elements
If you think you might be supply splitting
HMRC won’t offer advice regarding VAT supply splitting. You’ll need to decide whether your arrangements could be classed as supply splitting based on HMRC’s approach to single and multiple supplies and take appropriate action.
If HMRC find that VAT supply splitting has taken place
HMRC will continue to challenge these arrangements, which may include applying the Halifax abuse principle and taking cases through the courts.