Value shifting rules to be amended

HMRC has launched a consultation on a proposed revision of the rules for apportioning the consideration between supplies with mixed liabilities in a single transaction.

Value shifting can take place when a number of goods or services with different VAT liabilities are sold as a single package requiring the price to be apportioned between the VAT rates.  

The current law in VATA 1994 s 19 does not prescribe any particular method on how to apportion the price of items bundled together in a single transaction. The government is concerned that some businesses use the rules to reduce the VAT they account for by apportioning less of the total bundle price to products that are standard rated than appears to be justified. So it is making changes to ‘prevent inappropriate value shifting’ that will apply to all businesses selling bundled supplies and according to HMRC make the calculation...