Commentary

V7.425 Supply—part exchange transactions

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.425 Supply—part exchange transactions

Part V7 Tax planning | Commentary

V7.425 Supply—part exchange transactions

The basic VAT principle of part-exchange transactions is that there are two separate supplies taking place. It is important that amounts are not netted off against each other – VAT is due on the full value of supplies made. See Example 8.

Example 8

High Street Motors is VAT registered and sells a van to Mr Smith for £2,400 cash plus Mr Smith's Vauxhall car worth £3,000. High Street Motors account for output tax of £400 (ie £2,400 × 1/6 at a VAT rate of 20%).

Solution – this is incorrect – the sale of the van is effectively

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