Commentary

V7.433 Sales between related parties

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.433 Sales between related parties

Part V7 Tax planning | Commentary

V7.433 Sales between related parties

Imagine that Company A buys goods for £10,000 plus VAT and reclaims input tax on its VAT return. The goods are sold to Company B (a wholly owned subsidiary of Company A) for £1 plus VAT. The reason for this valuation is because Company B only makes exempt supplies and therefore cannot reclaim input tax. Is there a problem with this arrangement?

The answer is that there is indeed a big problem because HMRC has anti-avoidance rules in place which means it can direct that the value of a supply is the 'open market value'. The

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