Bartering as a way of saving tax
October 13th, 2009
If your customer is experiencing cashflow difficulties but can offer you a service you need, then why not consider bartering to settle your account? You can agree a reasonable value for his services and accept that in lieu of payment or as part payment. If you are registered for VAT, you will have issued him with a VAT invoice and your customer should pay you the VAT element on the bartered amount. If he is also registered for VAT, you will need to pay him the VAT element of his bill. As the services you have received equals the income you’ve foregone, the taxman has lost nothing.
If you are a company director and the service is something you could use for personal purposes, then you will be taxed on the benefit-in-kind (BIK). The value of the BIK is based on the cost of providing it so if, for example, your customer can sort out your home computer for you and the only cost is the hard-drive, then this is the cost that you will be taxed on. The BIK will have to be included on your P11D so don’t forget to get your customer to itemise this cost on his invoice.
The content of this article is for general information only. It should not be relied on and action which could affect your business or personal circumstances should not be taken without appropriate professional advice.
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