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HMRC internal manual

VAT Valuation Manual

Non-monetary consideration: barter transactions - valuation when one or both supplies have no clear value

A barter arrangement that appears to be becoming increasingly common is an exchange of services between two traders under some form of business promotion scheme. A typical example of such a scheme occurs, for example, when a newspaper prints vouchers or tokens in the paper which the purchaser collects in order to obtain free or discounted goods or services from the other trader. There is a wide variety of detail that can be involved in this type of scheme. For example, sometimes the newspaper may have agreed to allocate a specific amount of space to advertising the other trader’s name or to arrange that it receives so many seconds of airtime in television promotions, while in other cases no such precise terms exist.

Normally, it is not difficult to identify specific services being exchanged by the parties. The newspaper is providing the other trader with services of advertising and promotion. The other trader is allowing the newspaper to use its name and trading style in the promotion and may be supplying other services such as promoting the particular newspaper in return. There will be a general advantage to each trader through increased business from the promotion but this will not be relevant to the value because it is not something which is being provided by one of the parties to the other.

The problem is in attaching a value to either or both supplies. As with the situations described in VATVAL05900 this is a case where you will probably have to apply the Empire Stores principle to determine the value. It is probable that it will be easier to identify costs incurred by the newspaper in providing the advertising service than the costs incurred by the other trader. You may then treat the other trader’s supplies as being of equal value.

Remember, something cannot be regarded as non-monetary consideration if it is incapable of being expressed in monetary terms. It is possible that you may encounter a situation in which neither side of the barter can be translated into a monetary equivalent. In such a situation it would not be possible to view either set of services as being supplied for a non-monetary consideration.

Again, the question of being able to establish the proper value is of extreme importance when one of the traders within the promotion scheme is unregistered or partly exempt e.g. a credit card company or bank.