Valuation ― special rules

Produced by Tolley
Valuation ― special rules

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

  • Valuation ― special rules
  • Open market value rules
  • How do I work out an open market value?
  • Supplies between connected persons
  • Direct selling rules
  • Other special valuation rules
  • Private fuel (fuel scale charge)
  • Imports
  • Prompt payment discounts
  • Deemed supplies
    • More...

Valuation ― special rules

This guidance note considers some important special rules associated with valuing supplies for VAT purposes.

For an overview of valuation for VAT more broadly, see the Valuation ― overview guidance note and for the basic principles of valuation, see the Valuation ― basic principles guidance note.

In-depth commentary on the legislation and case law is provided in De Voil Indirect Tax Service V3.151.

Open market value rules

In certain circumstances, supplies are valued at their ‘open market value’ for VAT purposes rather than in accordance with the normal valuation principles set out in the Valuation ― basic principles guidance note.

Circumstances in which open market value rules may apply include:

  1. •

    supplies between certain connected persons

  2. •

    ‘direct selling’ arrangements

  3. •

    where a ‘self-supply’ occurs under rules for stock in trade cars (see the Buying and selling a car guidance note)

  4. •

    where fuel is supplied to employees / certain connected persons at below cost (see the Motoring expenses guidance note)

How do I work out an open market value?

Broadly, the VAT legislation takes an open market value to be the amount of monetary consideration that would be payable by a person ‘standing in no such relationship with any person as would affect that consideration’. In other words, it is important to look at what would have been paid if the parties to a transaction were not connected in any way.

Supplies between connected persons

HMRC has powers to direct that a business must account for VAT on the open market value of certain supplies made between connected parties. For this connected person rule to apply, the following conditions must be met:

  1. •

    a supply has to be made for a money consideration below open market value

  2. •

    the supplier and its customer must be ‘connected persons’

  3. •

    if the supply is a taxable supply, the customer must not be entitled to input tax credit for all the tax on the supply

VATA 1994, Sch 6, para 1(1)

For the definition of ‘connected person’ which also

There’s no margin for error.
Think Tax.
Think Tolley.
TolleyGuidance gives you direct access to critical, comprehensive and up-to-date tax information and expertise you can rely on.
Take a free trial
Popular documents
LEXISNEXIS

‘Bed and breakfasting’ with shares

‘Bed and breakfasting’ was the pre-1998 practice of selling shares and repurchasing them the following day. This technique can still be used in a modified form to achieve capital gains tax (CGT) savings for current or future tax years using:•a spouse / civil partner•a self-invested pension plan

LEXISNEXIS

Using the spouse exemption

Arguably, the most important exemption from IHT is the married couple / civil partner exemption.There is no IHT to pay on gifts from husband to wife and vice versa, or from one civil partner to the other (referred to collectively in this note as ‘spouses’). The exemption applies to inter-spouse

LEXISNEXIS

What is input tax?

This guidance note provides an overview of what conditions need to be met before a business is entitled to treat VAT incurred as input tax. This note should be read in conjunction with the other notes in the ‘Claiming input tax’ subtopic. For a flowchart outlining the procedure for claiming input

LEXISNEXIS

Trustees’ powers and duties

This guidance note provides an outline of the main trustee powers and duties. Although there is a degree of overlap between them, the term ‘powers’ usually refers to discretionary or optional actions which the trustees may take for the purpose of maintaining the trust and supporting beneficiaries.