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HMRC internal manual

VAT Time of supply

HM Revenue & Customs
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Treatment of supplies affected by a change in VAT: VAT rate or liability: adjustment of contract prices

Section 89 of the VAT Act 1994 (see VATTOS2285) allows for the adjustment of existing contracts to take into account any later change in the VAT rate. Unless the contract specifically provides otherwise, the contract price is required to be adjusted either up or down as the case may be, to take into account any change in the amount of VAT the supplier is eventually liable to account for.

This is purely a commercial provision intended to safeguard the positions of the parties to the contract. It has no revenue significance and HMRC has no jurisdiction in its application. You should therefore not be drawn into disputes between businesses over its interpretation. Any disagreement is entirely a matter between the parties to the contract and in extreme cases may end up in litigation between them.

In no circumstances is this provision to be used as the basis for determining a taxpayer’s liability to account for VAT at the time of a change in VAT rate.