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HMRC internal manual

VAT Supply and Consideration

Further guidance on identifying supply: Supplies of goods for no consideration: Samples

The rules applying to VAT on samples are contained in paragraph 5(3) of Schedule 4 to the VAT Act 1994.

All freely given samples are relieved regardless of the status of the recipient and whether or not they are in a form ordinarily for sale. However if a supplier sends several identical (or not materially different) samples to the same person, only the first is relieved of tax.

The only exception to this “one only” rule would be if the second and subsequent samples were demonstrably for quality assurance testing and the title to these goods remained with the supplier.

It will depend on the particular circumstances of each case whether two items are “different in a material respect” as the phrase cannot be satisfactorily defined. Factors such as colour and size may be significant in some situations and not in others. For example 25ml and 50ml bottles of the same perfume are unlikely to be materially different whereas a 12-inch bladed hedge trimmer and a 24-inch bladed hedge trimmer probably are. The key condition is that each item must be given as a sample, that is to someone who will use it as an illustrative or typical example for genuine business purposes or to benefit the business of the donor, that is not as a disguise for a higher value business gift.

Occasionally supplies will provide samples to members of the general public through an intermediary (generally a retailer). We will accept these as samples, direct to the final customer, from the supplier, providing that title transfers direct from the supplier to the final customer and never passes to the intermediary. Examples of this would include such items as sample sizes of perfumes and cosmetics, disposable contact lenses supplied to opticians for their customers to try out before deciding whether or not to buy or sample packs of disposable hardware goods given away by demonstrators at exhibitions such as the Ideal Home Exhibition.