Produced by Tolley

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Consideration
  • What is consideration?
  • Indicators
  • Forms of consideration
  • Compensation payments
  • Disbursements

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s VAT and customs regime. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit — overview guidance note.

This guidance note provides an overview of what constitutes consideration. This note should be read in conjunction with the Supplies of goods, Supplies of services and Consideration ― specific situations guidance notes.

What is consideration?

Consideration is the ‘payment’ made for a supply of goods or services. It is usually a payment in money, but it can also be non-monetary consideration, such as supplies of goods or services that are provided in exchange (for example a barter transaction or part exchange).

There is no legal definition of consideration but the EU legislation stated (this legislation has been repealed but this definition is still widely used):

‘“Consideration” means everything received in return for the supply of goods or the provision of services, including incidental expenses (packing, transport, insurance etc), that is to say not only the cash amounts charged but also, for example, the value of the goods received in exchange or, in the case of goods or services supplied by order of a public authority, the amount of the compensation received.’

There must be a direct link between the supply and the consideration received. Therefore, in order that a supply for a consideration can be made, there must be at least two parties and a written or oral agreement between them under which something is undertaken or supplied in exchange for the consideration. There will be a direct link between the supply and the consideration because the supplier expects to receive something in return for the supply and would not intend to fulfil the

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