Common VAT Problems

6. Watch out

VAT must be charged in a number of familiar situations outside the normal run of business.

6.1 Business gifts are usually treated as though they have been sold as VATable supplies, with output VAT due on the value. There are some exceptions.

• There is no output VAT due on individual free samples given to customers.
• One-off business gifts costing less than £50 (excluding VAT) do not attract output VAT. The £50 limit applies to all gifts made to the same person within a 12 month period.
• Gifts of services are not liable to VAT.
• Gifts of goods to charities for sale or export are zero-rated.

6.2 As a general rule, VAT must be charged on all sales to employees.

6.3 If you take items for personal use on which you have accounted for VAT, this counts as a sale (see 4.1).

• If you pay nothing, VAT is charged on the cost (normally the market cost).
• Special rules apply to cars and fuel.

6.4 The sale of business assets is normally treated in the same way as any other sale.

6.5 The sale of a business as a going concern may be VAT-free. Specific rules apply.