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HMRC internal manual

VAT Valuation Manual

Monetary consideration: standard reply to VAT on other tax queries

“It is a fundamental principle of VAT law that VAT on a supply of goods should be calculated on the price paid less the VAT itself. If other taxes or duties have been paid on the goods, they will be reflected in the price paid. There are a number of taxes and duties which have to be paid on goods before they reach the retail stage and which are reflected in the retail selling price. These include import duties and duties on beer, wine, spirits, tobacco and petrol.

These duties tend not to be identified separately at the point of sale but, if already paid, they do form part of the value on which VAT is charged.

The element of “tax on tax” is not unique to VAT. It existed from 1940 to 1973 when purchase tax was chargeable on many goods. If such goods were first chargeable with duty, this was paid and the amount included in the value for calculating purchase tax.”