Accounting for VAT on Christmas Hampers

VAT Question

My client is a food retailer and is putting together ‘Christmas boxes’ that include items which, when sold separately, would be standard-rated or zero-rated. “These ‘Christmas boxes’ are to be sold at a single price. How do I account for VAT on these sales?”

VAT Answer

In order to establish what VAT is payable on these sales you will need to analysis the cost of the goods included in the boxes to establish the cost price ratio of standard-rated items included in the boxes. That ratio should then be applied to the sales price to provide you with the value on which VAT is due.

For example, the total cost price of items included in the boxes is £50 and the total value of standard-rated items included is £20. In this case 40% of the cost price relates to standard rated items and therefore 40% of the sale is treated as standard-rate.

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