No new regulation
In January 2021 HMRC started a consultation about how businesses should work out VAT where they sell a “bundle“ of goods or services for one price but different VAT rates apply to separate elements within the bundle. For example, one or more elements are standard-rated while others are zero-rated. The aim of the consultation was to produce a statutory method of calculation. This idea has been abandoned.
Revised guidance
Instead of new rules HMRC has strengthened its guidance on how to apportion the value of supplies on which different VAT rates apply to each (see The next step ). There are two basic methods, one based on selling prices, the other cost values. Both can be modified to produce a fair and reasonable result.
HMRC has abandoned a fixed method of calculating VAT on bundles of goods or services sold for a single price where different VAT rates apply to certain elements. Instead it has improved its guidance. Make sure you read it if you sell bundled supplies.
The next step
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