Multiple supplies ― output tax apportionment

Produced by Tolley

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

  • Multiple supplies ― output tax apportionment
  • Apportioning output tax in mixed supply situations
  • What supplies are not covered by these provisions?
  • Apportionment method based on customary selling prices (market value)
  • Apportionment method based on the cost of both supplies
  • Cost-based apportionment method based on the cost of one supply
  • Retrospective adjustments of apportionment
  • Errors
  • HMRC assessment after unfair apportionment
  • Practical points

Multiple supplies ― output tax apportionment

This guidance note should be read in conjunction with the Single or multiple supplies ― overview, Single or multiple supplies ― indicators that it is a single or multiple supply and Single or multiple supplies ― other considerations guidance notes.

Apportioning output tax in mixed supply situations

It is the business’s responsibility to propose a suitable method of apportionment and HMRC cannot prescribe the method that should be used. There are basic apportionment methods which after being appropriately modified can be used in a large number of situations where it is necessary for the amounts to be apportioned and these are explained below; however these methods are not mandatory and businesses are entitled to use another method where it produces a fair and reasonable result.

Before it is possible to undertake an apportionment calculation, it is necessary to determine the following:

  1. is there more than one supply? See the Single or multiple supplies ― overview guidance note

  2. has a single price been paid for all of the goods / services supplied? See VATVAL03400

  3. can any part of the payment be treated as outside the scope of UK VAT? See VATVAL03500

  4. what are the VAT liabilities of the goods / services supplied?

If a single transaction that comprises of two or more supplies that are liable to different rates of VAT is being made, the business needs to work out the most appropriate method to apportion the amount charged between the different types of supply. The amount charged needs to be apportioned between the different components in order to calculate the amount of VAT due on the supplies that are liable to VAT at either the standard or reduced rate of VAT. Obviously, if both supplies are liable to VAT at the same rate, VAT will be charged at a single rate on the full value of the supply made.

HMRC expects businesses to allocate a fair proportion of the total value to each

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