VATVAL02600 - Monetary consideration: adjusting the value of a monetary consideration

There may be situations in which you believe that a trader has over-inflated or artificially reduced the charge for a supply. The most common example that VAT Supply have received requests for guidance upon is the transfer of a freehold or long-term leasehold interest at a nominal payment of, say, £1.

The valuation rules in these cases can be summarised as follows:

• there is no UK legislation by which an inflated payment in money can be reduced
• a nominal payment in money can only be treated as having a higher value for VAT purposes in limited specific circumstances. These circumstances are those covered by the provisions of the VAT Act 1994, Schedule 6 (paragraphs 1 and 2), concerning “connected persons” and direct selling. Full guidance on these provisions can be found in VATVAL07000.

However, in those cases where only a nominal monetary payment appears to have been made, you should look carefully to satisfy yourself that the recipient of the supply has not also provided additional consideration in a non-monetary form.

For example, in addition to giving £1 for a lease, the tenant may have been obliged to perform certain building works or improvements to a property for the landlord’s benefit.

Guidance on valuing this additional non-monetary consideration can be found in VATVAL05000. If you require guidance in establishing the existence of a non-monetary consideration you should refer to VATSC30500: Supply and consideration” in the first instance.