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HMRC internal manual

VAT Valuation Manual

Monetary consideration: VAT on other taxes

Under both the EC and UK law, it is only the VAT itself that is excluded from the value upon which VAT is calculated. Article 78(a) expressly provides that other taxes and duties must remain part of the taxable amount. Section 19(2) does not expressly stipulate that other taxes are included in the value for VAT purposes. However, any such taxes levied on a supply form part of the purchase price. They are therefore encompassed within that part of the consideration, which is separate from the VAT itself and upon which the VAT must be calculated.

In many situations there is no “duplication” of taxes because the supplies in question are exempt from VAT. The most obvious example of this is in the betting and gaming area, where there is often no VAT but gaming duties may be imposed.

There are other supplies, however, where VAT and other duties can coincide - spirits and tobacco, for example. You may receive complaints from persons who feel that it is unfair to have to pay “VAT on other taxes”. Such complaints were most common from purchasers of cars where VAT had to be paid on a value that included car tax. Car tax has now been abolished but the standard reply to complaints has been adapted and may be used to reply to complaints about VAT being charged on other taxes or duties. A standard reply format is set out at VATVAL02300.