Andrew Needham looks at some practical VAT issues involving guarantees and warranties.
In law, a guarantee is an agreement given by a business to a consumer (without any extra charge) to repair, replace or refund the cost of goods which do not meet the specifications set out in the guarantee.
A warranty is an insurance policy which provides cover for the unexpected failure or breakdown of goods, usually after the manufacturer's or trader's guarantee has run out.
Different VAT liability
Goods normally come with a manufacturer’s guarantee, which is included in the price of the goods. This is considered to be a ‘composite’ supply; in other words, you cannot separate the individual elements, and it will follow the liability of the goods being sold. So, if a business sells zero-rated goods, the whole price is viewed as zero-rated, and if
