VAT: whose risk?

If services are contracted to be provided over a period and the rate of VAT changes in the course of that period, who bears the burden of the increased VAT (or, less likely in the present climate, enjoys the benefit of the reduced VAT)?

It depends.

If a contract is silent as to VAT, any consideration specified in the contract is generally taken to be inclusive of VAT.  If VAT is to be payable by the customer in addition to the stated consideration, the contract must say so.

Thus, if the contract specifies a price of £X with VAT payable in addition, and the rate of VAT increases, so does the price payable by the customer.

On the other hand, if the contract specifies a price of £X inclusive of VAT (or, more to the point, simply £X with no mention of VAT) – as is the case, for example, in some standard domestic building contracts – and the rate of VAT increases, it’s the supplier who bears the additional cost.

There is, as far as we know, no general increase in VAT rates on the horizon; so this is unlikely to be an issue of immediate concern.  But it’s a point worth bearing in mind when drafting contractual provisions.

For more information about VAT, including its complexities in the property and financial services sectors, our specialists would be pleased to help. Please get in touch via your usual BKL contact or by using our enquiry form.



Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.


Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.


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