HMRC have published Spotlight 38 VAT: supply splitting tax avoidance schemes.

This is an occasional series where HMRC provides details on areas of taxation that it is looking at more closely.  Since 2010 only 4 of the 38 documents published have been on VAT.

The document sets out that HMRC are focussing their attention on businesses which are splitting supplies in order to have a lower VAT payment owed as tax avoidance.  This is possible because supply splitting occurs when a supply is made which consists of several different elements which each have different VAT liabilities.  The question for the supplying business to decide on is whether the supply should be split and the appropriate VAT rates applied to the different elements or it treated as a single supply with one single VAT treatment.

There have been many cases heard on this issue, such as CPP and Levob.  However, it would appear that HMRC believe businesses are still artificially splitting supplies hence the new spotlight on the issue.  Businesses involved with such supplies should therefore take extra care when deciding on whether to split supplies.

By |July 27th, 2017|