HMRC have published Revenue and Customs Brief 2 (2023) ‘VAT and value shifting consultation update’. This sets out HMRC’s conclusions and actions taken following the VAT and value shifting consultation in 2021.

The VAT and value shifting consultation Proposed fixed rules for how a consideration should be apportioned when items with different VAT liabilities are supplied for a single price. Responses were published in July 2021. 

A typical example of where the rules would apply would be a ‘meal deal’ which consists of a zero-rated sandwich and standard-rated drink and snack.

HMRC has concluded that the most effective way to address valuation concerns is to provide businesses with practical guidance on apportionment methods. There will be no legislative changes.

To this end, HMRC have:

  • Published ‘GFC2 (2023): Help with VAT apportionment of consideration’.
  • Amended section 31 of VAT Notice 700.
  • Updated the VAT manual at VATVAL03000.

Businesses are encouraged to first consider a selling price method of apportionment, where appropriate and available, before considering a cost price method or any alternative.

Where businesses conclude in the light of the new guidance that a submitted return should be corrected, the normal Error correction process should be followed.

If the correction is notified on the Government Gateway or VAT652 form, the reference ‘GFC2/2023’ should be included in the ‘reason for error’ box.

Useful guides on this topic

Mixed supplies: Single or Multiple supply?
Is a mixed supply a single or multiple supply for VAT purposes? What tests and case law apply?

Correcting VAT errors
What are the VAT error correction time limits? Can you correct errors through the VAT return? Do you have to notify HMRC?

Consultation: VAT and value shifting
HMRC have opened a new consultation 'VAT and value shifting' inviting views on a proposed revision to the rules for apportioning consideration between supplies with mixed liabilities in a single transaction. 

VAT and value shifting: Summary of responses
HMRC have published a summary of responses to their consultation 'VAT and value shifting' which took place earlier this year.

External links

Revenue and Customs Brief 2 (2023): VAT and value shifting consultation update

GFC2 (2023): Help with VAT apportionment of consideration

VAT guide (VAT Notice 700)

VATVAL03000 - Apportionment of monetary consideration: contents

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