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HMRC internal manual

VAT Valuation Manual

From
HM Revenue & Customs
Updated
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Non-monetary consideration: general - distinguishing between non-monetary consideration and no consideration

Non-monetary consideration exists when a supply is made in return for payment in the form of goods or services. In some cases there may be a non-monetary consideration in addition to the monetary consideration. Where there is non-monetary consideration only, a “barter transaction” has taken place. The valuation rule to be applied to the non-monetary consideration is the same, whether or not any monetary consideration has also been provided.

When goods or services are provided for no payment in any form, there has been no consideration. It is only necessary to value such a provision of goods or services in certain circumstances in which the VAT Act 1994 deems a taxable supply to have taken place. The commonest cases that you are likely to meet are as follows where:

  • there has been a disposal of goods forming part of the assets of a business for no consideration under paragraph 5(1) of Schedule 4 to the VATA 1994
  • there has been private use of goods held or used for the purposes of the business for no consideration under paragraph 5(4) of Schedule 4 to the VATA 1994
  • there is a deemed supply of goods forming part of the assets on hand at the time of de-registration under paragraph 8 of Schedule 4 to the VATA 1994
  • services supplied to a business have been applied to non-business use under the Value Added Tax (Supply of Services) Order 1993 (SI 1993 No. 1507).

After you have established that a deemed supply has occurred under one of the above provisions, you will need to apply one of the special valuation provisions found in Schedule 6 to the VATA 1994 to value:

  • the disposal of goods forming part of the assets of a business for no consideration or the deemed supply of goods forming part of the assets on hand at the time of de-registration, you should refer to paragraph 6 of Schedule 6 to the VATA 1994 (see VATVAL08700)
  • the private use of goods held or used for the purposes of the business for no consideration, you should refer to paragraph 7 of Schedule 6 to the VATA 1994 (see VATVAL08900)
  • the deemed supply when services supplied to a business have been applied to non-business use, you should refer to paragraphs 5 and 7 of the Value Added Tax (Supply of Services) Order (see VATVAL09000).