VAT and value shifting

HMRC has published a consultation – closing 30 March – on a proposed revision of the rules for apportioning the consideration between supplies with mixed liabilities in a single transaction.

The current law – in section 19(4), Value Added Tax Act 1994 (VATA 94) – is non-prescriptive and some businesses pay less VAT by apportioning more consideration (or ‘shifting the value’) to non-standard rated items.

Although the broad principles of the new rules are set, businesses can:

  • Comment on how these can be written into UK law
  • Draw attention to any issues the new rules present
  • Highlight whether greater clarity is required in some areas
  • Suggest other ways to tackle value shifting.

This consultation will be of particular interest to businesses that sell goods or services for a reduced price as part of a package or ‘bundle’.