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Introduction

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Similar to many other transactions, Barter and Part Exchange are taxable and treated as follows:

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Barter Transaction

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A barter transaction occurs where one party supplies goods or services in exchange  or payment for other goods or services.  The tax point for such transactions is when the transaction takes place. 

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The nature of barter transactions is that two supplies are made as follows:

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• A supply from one supplier to the customer

• A supply from the customer to the supplier

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VAT Liability

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The VAT liability of barter transactions is based on the arms length value of each item bartered.  Basically the market price that would have been paid had the goods or services been purchased and sold without

 

bartering.

 

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 Part Exchange 

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Part exchange follows the sames rules as transactions traded using barter.

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Set Offs

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A set off occurs where one individual owes another for a service provide or goods sold and both parties agree for the owing party to provide a service to clear the debt.  For example an Accountant maybe owed money by his client who is a butcher and both agree for the butcher to provide the accountant with 2 months worth of Steak to settle. Here the tax point occurs when an invoice is issued or the set off is recorded in the accounting

 

 

records of the parties.    

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VAT Liability

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Again two separate supplies have been made and both parties will have to account for VAT regardless of whether any cash has been paid. 

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-Contains public sector information licensed under the Open Government Licence v3.0.

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