VAT on mixed gift boxes

[GriffLewis]

Hi I own a cheesemongers and as part of the service we sell gift boxes that contain VAT goods like wine and non VAT goods like cheese. We are a small business but over christmas we sell hundreds of gift boxes, normally i go and calculate what was taxable and what was non taxable and enter them into sage, but over christmas its a nightmare. I was able to get a list of last year orders and worked out on average on over 500 gift boxes what % was cheese, what % wine etc. Could i use that this year and say on average 60% of the turnover from gift boxes is cheese. Or will HMRC have a field day with that approach. What made me think of this way, was i heard on the news over the pasty/pie caos, that shops will find it too hard to count each hot pasty they sell and will just have to say its about 5% of sales.

Thanks in advance

 

[David Griffiths]

This is a mixed supply and HMRC guidance is here.

There's no set way to do it, but you must be able to convince HMRC that the method is fair. The link does give some examples.

I shouldn't think that doing what you propose will cause any issues. You wouldn't be able to argue that you were charging £200 for a mousetrap and giving a crate of champagne away for nothing! (Not that you sell mousetrap, of course)

 

[AT Accounting]

Hi,

Had something similar this very morning. Retail business with Standard and zero percent sales which had a good till which broke and it took them 3 months to replace it.

They had done a lot of work to actually get very specific percentages (not just "say" 10%) and to be fair the VAT officier was one of the nicer ones I've met recently. She accepted their method with only a little fuss.

What you have is slightly different. You have what is known as a "mixed supply". From the VAT Guide (700 section 8.1) you are allowed to apportion the VAT. The way you calculate it is not specified only that you are able to justify them.


One additional point. If you are using a bookkeeping system you may be able to set up "products" which would help you keep track of them. The more precise the calculations the less fuss you will have.

All you really need to do is keep track of which products you ship. This does not have to be high tech, it could just be a list of products on a sheet of paper in your packing area with tally marks next to them as you pack each sale.

 

[GriffLewis]

Thanks for your reply, but its a bit more complicated than just keeping a tally as we ship say happer XX, which contains 2 cheeses, a bottle of wine, the hamper its self is taxable and then the carriage. If i was going to do this correctly, for each type of hamper i would have to look up how much cheese in that particular hamper and then how much wine etc...when we have 700 dispatches and 20 different hampers this is very hard. Therefore proposed mothed is to take the net money taken on that day (for hamper sales) and allocate 60% to cheese, based from ratios of historical sales.

 

[AT Accounting]

As long as you are happy to justify it the HMRC if they ask then thats all fine.