Value Added Tax Act 1994 Schedule 9ZA paragraph 9

Transactions below market value

Paragraph 9 of Schedule 9ZA deals with HMRC's power to direct that the value of goods acquired from an EU member state be increased to open market value where the transaction is between connected persons at an undervalue and the acquirer cannot recover all the VAT charged.

• Where goods are acquired from a member state for a monetary consideration that is below open market value, and the supplier and acquirer are connected persons, and the acquirer cannot reclaim all the VAT on the acquisition, HMRC may direct that the transaction be valued at its open market value instead.
• The direction must be given in writing to the person making the acquisition and must be issued within three years of the relevant time of the transaction.
• A direction can also cover future transactions — any subsequent acquisitions from a member state by the same person that meet the same conditions can automatically be revalued to open market value from the date of the notice or a later date specified in it.
• Open market value means the price that would have been paid if the parties were independent of each other, and HMRC may vary or withdraw any direction by issuing a further written notice.

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