We last looked at this tricky subject over a year ago, and I think it is time for a review…

Many of you will know that a supply for VAT purposes will only be a supply if there is some consideration given. So no consideration, no supply.

Except when there is a deemed supply. The deeming rules exist (mainly) to ensure that input VAT recovery is balanced by output VAT on an onward disposal of an asset (and also services, though this is rarer).

The basic idea makes sense: VAT works like a pipeline, and as long as there is output VAT at the far end, there can be input VAT at the first point in time. However, two big issues in real life create a problem:

• First, when businesses give goods away to help promote their business, and
• Secondly, when businesses give samples away to allow customers to try out their products to see if they want to buy them

In order to take the sting out of the deeming rules, there are exceptions for these scenarios, and we cover these later on.

However, this Update does not cover the vast array of business promotions and similar activities – such as “buy one, get one free” and other offers which are a regular part of retail life. HMRC cover the most common such scenarios in VAT Notice 700/7, and if you’re facing a situation like that, start with that Notice…