The Indirect Taxes (Notifiable Arrangements) Regulations 2017

Retail supplies – splitting and value shifting

4.—(1) An arrangement which meets the following description is a notifiable arrangement.

(2) A person (“A”) makes a supply (“supply 1”) of goods or services to a retail customer (“C”).

(3) A, or another person (“B”), makes a supply (“supply 2”) of other goods or services to C.

(4) In relation to supply 1 and supply 2—

(a) condition 1 or 2 is met; and

(b) condition 3 is met.

(5) Condition 1 is met if—

(a) were supply 1 and supply 2 made as a single supply or part of a single supply to C, that single supply would be taxable at the standard or reduced rate of VAT; and

(b) supply 1 or supply 2 is, or both are,—

(i) taxable at the reduced rate of VAT;

(ii) a zero-rated supply; or

(iii) an exempt supply, except a supply which is subject to insurance premium tax at the higher rate.

(6) Condition 2 is met if—

(a) were supply 1 and supply 2 made as a single supply or part of a single supply to C, that single supply would be an exempt supply; and

(b) supply 1 or supply 2 is, or both are,—

(i) taxable at the standard or reduced rate of VAT; or

(ii) a zero-rated supply.

(7) Condition 3 is met if it would be reasonable to conclude that two or more of the following apply—

(a) C would not agree to receive supply 1 without also agreeing to receive supply 2;

(b) where supply 2 is made to C by B, B makes the supply with the agreement of A;

(c) supply 1 and supply 2 would be made as a single supply or part of a single supply to C were it not for a VAT advantage which is obtained, or which may be obtained, by making those supplies separately to C;

(d) the business model of A or B (or both) assumes that—

(i) only A will make supply 1 to C;

(ii) only A or B (as the case may be) will make supply 2 to C; and

(iii) the agreements to make supply 1 and supply 2 will be entered into with C at or about the same time;

(e) of supply 1 and supply 2, at least one is dependent on the other;

(f) were supply 1 and supply 2 made as a single supply or part of a single supply to C, that supply would be made at or about the same price as the price of both supply 1 and supply 2 are made to C;

(g) a higher profit is generated from whichever of supply 1 or supply 2 is the supply which obtains the greater VAT advantage.

(8) In this regulation, “zero-rated supply” has the meaning given by section 30 of the Value Added Tax Act 1994(1), excluding a supply of goods or services within items 2(d) and (g) and 8 to 13 of Group 12 in Part 2 of Schedule 8 to that Act.

(1)

Section 30 was amended by section 28 of the Finance Act 1995 and section 29(2) of, and paragraph 7 of Schedule 3 to, the Finance Act 1996 (c. 8).