HMRC updated Notice 700 on 9 June 2023.
Changes
VAT MOSS references to credit notes for supplies of digital services, the annual accounting scheme, and monthly tax periods have been removed.
Updates also reflect the introduction of VAT late submission and late payment penalties, as well as the new interest regime in paragraphs 2.7, 19.9, 21.1, 21.2.1, 21.6, 27.1 and 28.
Further to my article on apportionment valuation and case review here and Transfer Pricing valuation I thought it useful to consider HMRC’s internal guidance on its approach to valuation.
Sometimes a single monetary consideration may represent payment for two or more supplies at different VAT rates. In such cases, a business is required to allocate a “fair proportion” of the total payment to each of the supplies. This requirement is set out at in The VAT Act 1994, Section 19(4).
“Where a supply of any goods or services is not the only matter to which a consideration in money relates, the supply shall be deemed to be for such part of the consideration as is properly attributable to it.”
Although this section requires an apportionment of the consideration to be performed, it does not prescribe the methods by which this is to be achieved. The most common methods are based upon the costs incurred in making the supplies or the usual selling prices of the supplies.
Examples of methods that have been found to be of general application are contained in VAT Notice 700 para 8. A business is not obliged to adopt any of these suggested methods, and HMRC may accept alternative proposals provided that they achieve a fair and reasonable result that can be supported by valid calculation.
Some sectors have special methods called margin schemes to determine apportionment of the monetary consideration. Details of these found in their notices and guidance. The schemes include:
Basics
Before it is possible to perform an apportionment calculation, there are four basic questions that need to be addressed to determine whether an apportionment is appropriate and if so, what supplies it relates to.
The issue of whether there is a single or multiple supply has created problems from the outset of the tax. The volume of case law illustrates that each decision is based on the facts of each case and there cannot be a one-size fits all approach to this issue. The most important and recent cases are here:
Metropolitan International Schools
General Healthcare Group Limited