V3.153 Value—subsidies

Directive 2006/112/EC provides that the taxable amount is everything which constitutes the consideration obtained by the supplier, including subsidies directly linked to the price of such supplies1. This provision is not reflected in the UK legislation. However, HMRC is empowered to make regulations providing that the consideration for a supply includes (where it would not otherwise be included) money paid in respect of the supply by persons other than those to whom the supply is made2. No regulations have been made to date.

The ECJ has held3 that the mere fact that a subsidy could affect the price of a supply does not necessarily mean that the subsidy forms part of the consideration (and therefore the taxable amount). There must be a direct and unequivocal link between the subsidy and the supply in question. There does not have to be an exact correspondence between the subsidy and the diminution in price, but there must be a significant relationship. In addition, the price of the goods or services must be determined (or determinable) not later than the time of the triggering event (ie the payment of the subsidy). See also EC v Sweden (Case C-463/02), where a subsidy relating to the processing (drying) of fodder was not regarded as

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