V3.162 Value—supplies to connected persons

Part V3 Supplies, acquisitions and imports

V3.162 Value—supplies to connected persons

V3.162 Value—supplies to connected persons

Supplies below open market value

HMRC is empowered to direct1 a person to account for output tax by reference to open market value if2:


    •     a supply (whether taxable or exempt from tax) is made for a money consideration below open market value


    •     the person and the customer are connected persons3, and


    •     if the supply is a taxable supply, the customer is not entitled to input tax credit for all the tax on the supply

Valuation under this provision was originally by derogation from Directive 77/388/EEC, art 11A(1)(a) (now Directive 2006/112/EC, art 73). Failure to obtain such a derogation under Directive 2006/112/EC, art 395 (formerly Directive 77/388/EEC, art 27) is likely to invalidate such a provision; see Campsa Estaciones de Servicio SA v Administracion del Estado ([2011] All ER (D) 73 (Jun), Case C-285/10, ECJ). However, with effect from 13 August 2006, Directive 77/388/EEC, art 11A(6) (now Directive 2006/112/EC, art 80) allows member states to direct open market value without the need for a specific derogation. This is subject to the meeting of certain conditions,

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