“Cashbacks” and trade-ins are not the same thing for VAT, as Rob McCann of the VAT People explains.
It is quite common for businesses to exchange goods or services with each other. This is sometimes an exchange of goods or services with a like for like value, or sometimes payment is made for a supply by part cash payment and part reciprocal services/goods. It is equally common for the same businesses to assume that there are no VAT consequences for such an arrangement as there is no money changing hands, however, this is not usually the case.
This is highlighted by the recent case of AV Concepts, which involved a supply of goods in return for a cash payment and obsolete goods. The hearing should have been a fairly simple case involving a dispute with HMRC about VAT of only just over £1,000, however it looked at some complex issues relating to how the value of a supply is determined when a barter transaction occurs.
Continue reading VAT and Barter Transactions.