Revenue Note for Guidance

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Revenue Note for Guidance

PART 5 – TAXABLE AMOUNT

Overview

This Part, which has 2 Chapters, contains provisions relating to the taxable amount (sections 36 to 45).

Chapter 1 sets out the main rules on the taxable amount – that is, the amount on which tax is chargeable – for different transactions. In general, VAT is payable on the full consideration, excluding the tax itself, but including any ancillary charges made, such as additions for packing, transport, etc. and any other costs that the supplier passes on to the customer. Revenue may also make a determination that tax is chargeable on the basis of open market value in some circumstances.

This Chapter also covers the taxable amount for vouchers, tokens and the like, and the calculation of the taxable amount for self-supplies, for services received from abroad and for cross-border transfers of business goods. Other provisions include the rule for determining whether a supply is taxed at the rate appropriate to a supply of goods or a supply of services when both goods and services are supplied together, as well as the taxable amount for excisable products and other special cases.

Chapter 2 deals with adjustments when, for example, the VAT rate changes before a contract is fulfilled. The provisions also cover recovery of VAT when the tax is shown separately on an invoice issued by an accountable person.

Chapter 1 – Taxable amount – principal provisions

36. Definitions – Chapter 1 (Part 5)

This section defines open market price and open market value for the purposes of Chapter 1 of Part 5.

  • Open market price is the price that the goods or services in question might reasonably be expected to fetch on the open market. This applies to goods, services and intra-Community acquisitions. Note that it does not apply to imports, where customs rules apply – see section 53.
  • Open market value is the arm’s length consideration for the goods and services. If there is no comparable supply, the open market value is not less than the purchase price/cost to the supplier.

Relevant Date: Finance Act 2019