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HMRC internal manual

VAT Valuation Manual

HM Revenue & Customs
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Non-monetary consideration: reconciliation of the Naturally Yours and Empire Stores decisions

You may get representations from traders operating “reward goods” schemes, claiming that VAT is only due upon the cost price of those goods irrespective of the precise details of the arrangement that they are operating. You should not automatically accept a costs basis of valuation.

Where non-monetary consideration exists, you are trying to find the amount of money that it replaces. You should therefore look to establish whether the “reward goods” would otherwise be available to the recipient for a specified monetary payment. Often you will find that the person who has provided the non-monetary consideration would otherwise have to pay the normal catalogue retail price for the goods. The value of the non-monetary consideration can then be calculated by deducting any monetary payment actually made from that normal retail price. This is essentially the application of the principles set out in Naturally Yours.

It may be the case that the “reward goods” supplied to providers of non-monetary consideration are not otherwise sold by the supplier at all. For example, they may not be items which the trader has included for sale via its catalogues. Where this is the case, there is no clearly identifiable monetary equivalent that would otherwise have been paid. In these cases, value will usually be calculated by reference to what it has cost the supplier of the “reward goods” to obtain the services from the other party i.e. the cost price of the “reward goods”. This is the application of the principle set out in Empire Stores.

Your general rule is therefore to apply Naturally Yours first and only to fall back on Empire Stores when Naturally Yours cannot be applied.