Is bartering the way forward?
Bartering is a growing trend particularly with cash restrictions in the recession. But the fact that no cash changes hands does not necessarily mean no tax impact.
For VAT both parties have to agree a reasonable value for their services, and assuming they are both registered, must issue an invoice for VAT purposes only. Assuming the services exchanged are of equal value input = output = no cash, if not there is a liability.
For income or corporation tax, provided the services exchanged are of equal value the income notionally received is cancelled out by the costs notionally payable, otherwise, again an adjustment is required.
As ever, proper documentation is key.
Cathy Corns is a tax adviser and a partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this blog with Cathy you can call her on 01908 605552.
Date: 24th October, 2009
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