The CIOT has responded to HMRC’s consultation on VAT and value shifting. The consultation set out proposed changes to the current rules for apportioning the consideration between supplies with mixed liabilities in a single transaction, in order to prevent businesses from shifting the value to non-standard rated items sold in a bundle and thus accounting for less VAT. The CIOT’s responses include the following:
HMRC has not demonstrated that there is sufficient ‘value shifting’ to warrant a wholesale change to the VAT rules which will affect all VAT-registered businesses that sell a number of goods or services for a single price.
HMRC has adequate armoury to challenge such arrangements as many simply fail on technical merits, or on ‘abuse’ grounds. If any additional armoury is considered necessary this should be targeted at the mischief it intends to prevent, without creating significant collateral damage for other taxpayers.
In their current form, the proposed rules could create opportunities to manipulate the amounts attributable to bundled supplies, such as by inflating individual selling prices of zero or lower rated components, and could result in a smaller proportion of the consideration being properly attributable to positive rated supplies, necessitating complex anti-avoidance measures.
Exceptions to any new rule should be considered; for example, non-profit making bodies which apportion their subscription income in accordance with Extra Statutory Concession 3.35, together with any other ‘bespoke’ agreements with HMRC, should be allowed to continue.
The CIOT has responded to HMRC’s consultation on VAT and value shifting. The consultation set out proposed changes to the current rules for apportioning the consideration between supplies with mixed liabilities in a single transaction, in order to prevent businesses from shifting the value to non-standard rated items sold in a bundle and thus accounting for less VAT. The CIOT’s responses include the following:
HMRC has not demonstrated that there is sufficient ‘value shifting’ to warrant a wholesale change to the VAT rules which will affect all VAT-registered businesses that sell a number of goods or services for a single price.
HMRC has adequate armoury to challenge such arrangements as many simply fail on technical merits, or on ‘abuse’ grounds. If any additional armoury is considered necessary this should be targeted at the mischief it intends to prevent, without creating significant collateral damage for other taxpayers.
In their current form, the proposed rules could create opportunities to manipulate the amounts attributable to bundled supplies, such as by inflating individual selling prices of zero or lower rated components, and could result in a smaller proportion of the consideration being properly attributable to positive rated supplies, necessitating complex anti-avoidance measures.
Exceptions to any new rule should be considered; for example, non-profit making bodies which apportion their subscription income in accordance with Extra Statutory Concession 3.35, together with any other ‘bespoke’ agreements with HMRC, should be allowed to continue.
