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HMRC internal manual

VAT Valuation Manual

Non-monetary consideration: barter transactions - valuation when each supply has a different value

We use the term barter transaction to denote a transaction in which no monetary payment is made. It is a term of convenience and has no statutory interpretation under the VAT legislation. Such a transaction can involve goods, services or a mixture of both, being supplied in return for a supply of goods, services or a mixture of both from the other party - each trader’s supply constitutes the consideration he is providing in return for the supply from the other party.

One example of a barter transaction that is quite common is where a publisher of a newspaper or magazine runs a competition in which entrants compete for prizes that donors have provided. A barter exists when the publisher is contractually bound to provide advertising to the donor of the prize in return for its provision. More information about this can be found in Notice 701/41 Sponsorship (HMRC website).

Non-monetary consideration has to be valued by reference to a subjective value that the parties must be regarded as having assigned to the consideration.

A difficulty arises when each party has good reason for ascribing a different value to the consideration. The question of discrepant or equivalent values applying to supplies within a barter transaction has not been considered by the VAT Tribunals or Courts and any cases of this kind should be submitted to the VAT Supply team.