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 taxable supplies, with VAT due on the value. There are some exceptions.

• There is no VAT on individual free samples given to customers.
• One-off business gifts costing less than £50 (excluding VAT) do not attract 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.