VAT registered businesses must charge VAT on taxable supplies of goods or services that they make. Supplies include day to day sales, free samples, part exchanges and barter transactions.
Tax Point – A tax point is when a transaction takes place for VAT purposes. If any part exchanges, barters or contras occur you will need to check that you’re using the right tax point so each transaction is on the right VAT return.
Exchanges – There are various circumstances when you might receive goods from your customers for supplying them with goods or services. The VAT treatment can differ depending on the nature of the transaction.
Reconditioned unit – if your business provides a reconditioning service and supplies reconditioned units in exchange for unserviceable ones, then you must charge VAT on the full amount you charge for the reconditioned unit.
If in part exchange for the reconditioned goods your customer gives you an unserviceable unit you can either:
- Issue a credit note
- Agree with the customer to leave the original VAT charge as it is.
One off exchanges – You might exchange 1 item for another, or exchange goods for other goods at a reduced price, on a one off basis. For example a car salesman might sell a car for £1500 plus the customer’s old car. You should treat this sort of transaction as a part exchange.
Part exchanges – If you supply goods or services and receive other goods or services in exchange (or part exchange) you must account for VAT on the amount the customer would have paid you if they had given you money instead.
Barter transactions – If you supply services or goods and receive other goods or services in return two separate transactions occur:
- The supply from you to your customer
- The supply from your customer to you
If you and your customer are VAT registered you both must account for VAT. The VAT treatment is the same as part exchanges. You must both account for VAT on the amounts you would each have paid for the goods or services if there had been no barter and they had been paid for with money.
If you need help with your VAT calculation or would like us to do your VAT return contact us on 0113 2864486 or admin@businessworksuk.co.uk
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