Goods taken from business

Goods taken from business

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Our clients trade as a partnership and own a restaurant. They take wine out of the business to consume at home. The Revenue, applying the case of Wernher v Sharkey, claim that the market value the client should be charged for the wine is the restaurant price (eg £15). Our argument is that wine consumed in a restaurant is a different commodity to wine consumed at home. The restaurant wine includes service, ambience etc. The market value should therefore be the equivalent of the supermarket price which is the relevant market for wine consumed at home (say £4). Why would our clients charge themselves £15 for wine which could be bought by anyone in the supermarket to take home at £4? Has anyone any experience with this?
Amanda Ruggles

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By User deleted
25th Sep 2006 08:50

Pepper vs Hart
It was established in the above case that the intentions of Parliament have a bearing on the interpretation of tax law.

The case specifically concerned the valuation of school fees as a BIK.

The Revenue said "selling price" but Parliament said "marginal cost".

The case has since been applied for transport workers (marginal cost of free travel = nil BIK as opposed to market value).

I'm not sure if there's a legislative override for restaurant goods BIK, but the Pepper vs Hart logic suggests that the BIK is the cost to the restaurant as opposed to an inflated and inappropriate charge based on selling price.

In any event, the supply was not for catering on premises but rather for goods alone which is not the businesses normal trade, so the wine was not supplied as part of the trade and so not comparable to sales.

What I have quoted above would apply to an employee, ie. a director of a Ltd Co operating the restaurant.

In the case of a sole trader or partnership it is best (and more correct for VAT purposes) to analyse purchases at the point of bookkeeping, putting the VAT-inclusive value of goods bought for self to drawings and the VAT exclusive price of those goods for resale to purchases. In any event to try to apply a restaurant selling price to goods not consumed in a restaurant is clearly a nonesense.

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