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HMRC internal manual

VAT Valuation Manual

Non-monetary consideration: part exchange: allowances for traded-in goods

Sometimes a dealer may offer a fixed allowance for traded-in goods, irrespective of their true value, as a sales promotion offer. There are certain circumstances in which such an allowance can be treated as a discount so that the value of the supply is only the amount of actual money received. These situations are:

  1. If a fixed allowance is offered:
* irrespective of the nature of the item traded-in
* for any item of a particular class without regard to make, age, model or condition
* for an item of a particular class or make irrespective of age, model or condition provided that no attempt is made to value the traded-in goods and there is no reason for the goods to be accepted other than for trade promotion (which would not apply where prior arrangements have been made for the traded-in goods to be reconditioned or sold), or
  1. If a manufacturer or distributor advertises nationally or regionally a trade-in allowance on an “at least” basis (e.g. an allowance of “at least” £5) which would fall within the above criteria if it had simply been a fixed allowance. Retailers can offer more than one minimum allowance but only to promote sales, it must not be because they value the traded-in goods at a higher level. There must be no references to the age or condition of the traded-in items.