Valuation – introduction

By Tolley

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

  • Valuation – introduction
  • Consideration wholly in money
  • Consideration not wholly in money
  • Inclusive or exclusive of VAT
  • Barter transactions
  • Part exchange

This guidance note provides an overview of the main valuation rules that apply in the UK to supplies of goods and services. This note should be read in conjunction with the Consideration, Consideration – specific situations and Valuation – special rules guidance notes. In the UK VAT will be charged on the following:

De Voil Indirect Tax Service V3.152 (subscription sensitive); VATSC30000
  • the supply of goods and services in the UK
  • the acquisition of goods in the UK from another EU member state
  • the importation of goods from outside the EU

VATA 1994, s 1(1)

Consideration wholly in money

If a supply is for a consideration in ‘money’, its value for VAT purposes is such amount as, with the addition of the VAT chargeable, is equal to the consideration (VATA 1994, s 19(2)) unless one of the special valuation rules are applied to the supply (see the Valuation – special rules guidance note). If the payment received is inclusive of VAT then the VAT element of the total amount of consideration received is determined by multiplying the consideration by the VAT fraction (currently 1/6 for supplies liable to VAT at 20%).

VATA 1994, s 19(2)

It should be noted that if other taxes are due on the supply made, the taxable amount must include any taxes, duties, levies and other charges due, with the exception of the VAT, as these are deemed to form part of the overall purchase price of the supply (2006/112/EC , Article 78(a)).

It should be noted that unless one of the following provisions applies, the supplier can charge whatever they decide for the goods / services provided and there are no valuation provisions that can force a supplier to reduce an over-inflated or under-inflated

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