I’ve seen a few people talking about barter transactions, or skills swaps. I think they’re a fantastic idea, and am part way through one myself – watch this space for a new shiny combined website and blog in a couple of months, which I am paying for via providing accounting services. But how do you treat them for tax purposes?
If you are VAT registered, then you need to be careful. Youmust account for VAT on the value of the goods or service you are providing. If the other person is also VAT registered, then you can account for imput VAT on the value of the goods or service you receive. It makes no difference that no money changes hands.
For example, in my accounting services for web design services swap, we would have to define a value (e.g. £500 for each service), and calculate the VAT on that value (£500 x 20% = £100), and we would both include an additional £100 of input VAT and an additional £100 of output VAT on our VAT returns.
When you are working out your sales number, you will have to add on any goods or services you supplied to someone else in exchange for goods or services. Again you will need to calculate the value of what you supplied.
Likewise when you are adding up your business expenses, you will have to add on any goods or services you received through a barter or skills swap, so you will need to know the value.
The best approach is to issue invoices as normal so that you both have a clear record of the transaction.
And if anyone is interested in a skills swap in exchange for accounting services, then drop me a line!