Andrew Needham looks at VAT and contract law and how it is important to get VAT clauses correct.
Many contracts do not mention VAT and some just have a short clause stating that prices are exclusive of VAT. But how do these types of clauses protect the vendor if there is a query over the VAT liability of the supply, or HMRC considers that the wrong liability has been applied to the transaction at a later date?
How does this affect the vendor?
It is the responsibility of the supplier in a transaction to account to HMRC with any VAT due. In a sale, the supplier is the seller; in a lease, the supplier is the landlord. VAT is not always due; sometimes, it depends on whether the property is less than three years old, and in other cases the issue is whether the seller or landlord has chosen to charge VAT by opting to tax.
If a contract is silent about VAT on the price
