Supply splitting schemes under the spotlight

HMRC has issued a spotlight targeting supply splitting schemes after uncovering attempts to avoid VAT by splitting a single supply of goods or services into separate supplies. It warns that the schemes do not work and it will investigate anyone who uses one.

The splitting results in a lower rate of VAT on each separate supply. Arrangements that should be taxed as a single supply include those when:

• multiple suppliers are used and the same elements could be provided by one supplier; and
• the customer has no opportunity to decline to take one of the individual elements.

HMRC outlines its approach to single and multiple supplies in the VAT Supply and Consideration Manual.

Neil Warren independent VAT consultant said: ‘The supply splitting legislation was introduced in Finance Act 2011 mainly to prevent the type of VAT planning seen in Telewest Communications...