Part exchange discount

The taxpayer company supplied white boards to schools and accepted obsolete equipment in part exchange.

The issue was whether or not the sale was a part-exchange in which the consideration comprised cash and the part-exchange item. The firm claimed the obselete equipment should be treated as a discount with the consideration being just cash.

It emerged during the First-tier Tribunal hearing that the white boards were first sold at full price to a third party which then leased them to schools.

The taxpayer made a separate payment for the obsolete equipment meaning the transactions were not part-exchange deals.

The tribunal said the arrangement made the company’s claim – that the transactions were discount sales – untenable. The business had to account for VAT on the full price of the goods sold to the leasing firm.

The taxpayer’s appeal was dismissed.

Independent VAT consultant Neil Warren stressed the...