The short answer
What HMRC’s 2026 withdrawal of the linked goods concession means for businesses supplying minor goods or services with a main VAT supply.
HMRC withdrew the linked goods Extra Statutory Concession described in paragraph 3.7 of Notice 48. The practical message is less dramatic than “the VAT rules changed”: HMRC says the concession is no longer needed because supplies that previously qualified should already be treated as a single supply under legislation and established case law.
Businesses should therefore continue to analyse whether a transaction is a single supply or a mixed supply. A minor article that is ancillary to a principal supply, or items so closely linked that splitting them would be artificial, may remain part of one single supply. Where a transaction is genuinely mixed, the consideration must be apportioned under the VAT legislation.
The concession was withdrawn
Single or mixed supply still depends on facts
Mixed supplies need apportionment
What did HMRC withdraw?
Revenue and Customs Brief 1 (2026) confirms that the Extra Statutory Concession in paragraph 3.7 of Notice 48 is no longer needed and will be withdrawn. It covered certain linked goods or services that were sold with a main supply at a single price.
HMRC says the withdrawal is not intended to introduce new compliance obligations or change the VAT treatment of supplies that would previously have qualified. Those supplies should continue to be treated as single supplies under the legislation and case law. The business still needs to apply the ordinary single-and-multiple-supply analysis to its actual transaction.
| Transaction pattern | Starting VAT question |
|---|---|
| Minor item is ancillary to a principal supply | Is it a better way of enjoying the principal supply? |
| Items are objectively one indivisible economic supply | Would splitting them be artificial? |
| Distinct goods or services sold for one total price | Is the consideration required to be apportioned? |
| A business relied only on the old concession wording | Can the same result be supported by the ordinary legal analysis and records? |
These are decision prompts, not automatic classifications.
Single supply: the ancillary-item test
HMRC describes a single supply where a minor item is ancillary to the main supply and is a better way for the customer to enjoy the principal supply. The customer’s real objective is normally the main supply, while the linked item supports, facilitates or accompanies it.
The fact that a business lists an item separately, gives it a price in a system or includes it in a package does not by itself decide the VAT result. Look at what the customer is actually buying, whether the linked item has an independent purpose, and whether removing it would undermine the principal supply.
Examples need to be tested against their facts. A supplied accessory, delivery element, support service or minor article may be ancillary in one commercial arrangement but a separate customer choice in another. Do not copy a conclusion from a different industry without checking the contract, marketing, pricing and customer use.
Single supply: the indivisible-economic-supply test
HMRC also refers to supplies that are so closely linked that, from an objective point of view, they form one indivisible economic supply and it would be artificial to split them. This focuses on the transaction as a whole rather than on how many physical items or service steps appear in the order.
Relevant evidence can include the contract, customer expectation, whether the elements are normally supplied together, whether one element is optional, how the price is set and whether the elements have separate economic purposes. No single factor always decides the result.
The analysis is not an invitation to bundle separate products simply to obtain the most favourable VAT treatment. If the customer can buy the elements independently, values them independently and receives distinct benefits, the transaction may be mixed even if the seller offers a package price.
When is a supply mixed?
A mixed supply contains separate goods or services supplied for a single consideration, potentially with different VAT liabilities. Where the transaction is genuinely mixed, HMRC says the business must apportion the consideration using section 19(4) of the VAT Act 1994 and the relevant VAT guidance.
The apportionment method should be reasonable, explainable and supported by records. Depending on the facts, the business may use an appropriate value-based approach, but it should not choose an arbitrary split merely because it produces a preferred VAT rate. Review discounts, free items, delivery, warranties, access, installation and other elements as part of the whole transaction.
Keep the pricing model and calculation evidence with the VAT records. If the product mix, customer journey or pricing changes, the original analysis may need to be refreshed.
What should businesses do after the concession withdrawal?
Businesses that already treated qualifying linked supplies as single supplies do not need to create a new VAT category solely because the concession was withdrawn. They should document the ordinary legal reasoning that supports the treatment and update internal references from the old concession to the relevant single-and-multiple-supply guidance.
Businesses that used the concession as a shortcut should review their main packages, particularly where a minor item may have an independent use or value. The review should identify whether the business has a single supply, a mixed supply, or separate supplies with separate consideration.
Do not automatically split every historical invoice, and do not automatically preserve every historic conclusion. The correct action depends on whether the legal analysis and records support the treatment without relying on the withdrawn concession wording.
Evidence for the classification
Build the analysis from the customer's economic reality, not from the product catalogue alone. Save the contract, order journey, terms and conditions, quotation, invoice layout, marketing description, product options and evidence of what the customer actually receives. Ask whether the customer can decline the linked element, whether it has a standalone use, whether a different customer could buy it alone and whether the principal item still has the same function without it. None of these questions is decisive by itself, but together they explain why the business reached a single- or multiple-supply conclusion.
The price structure is relevant but not determinative. One total price can contain multiple supplies, and separate invoice lines can still describe one supply. A “free” item may be an ancillary part of a taxable principal supply, or it may be a distinct benefit whose value has been absorbed into the total price. Do not use a nominal £0 line to avoid identifying a separate VAT liability. Conversely, do not split packaging, delivery or an instruction service that is integral to the main supply merely because the accounting system creates a separate stock code.
If the transaction is mixed, document the apportionment method before filing the VAT return. Start with the legal consideration and allocate it on a reasonable and consistently applied basis that reflects the supplies. Keep the calculation, source values, discounts and any residual amount. Revisit the method if the price, customer mix, product contents or supplier arrangement changes. A spreadsheet that produces a preferred VAT outcome but cannot be explained from the contract is weak evidence.
Review historic and future transactions
The January 2026 brief says the withdrawal is not intended to change the VAT treatment of supplies that previously qualified or to introduce new compliance obligations. That does not mean every historic treatment is automatically protected. Identify packages where the old concession was the only authority quoted, then write a short ordinary-law analysis using the current HMRC single-and-multiple-supply guidance. Keep the original invoice and the review date; do not make a blanket retrospective change without finding an actual error.
For future launches, include VAT classification in the product approval process. Tax, commercial, finance and technology teams should agree the principal supply, any linked elements, the customer-facing price, the invoice presentation, the VAT code and the evidence retained. Test refunds, partial cancellations, substitutions, upgrades, bundles and promotional gifts. A change in the customer journey can change the objective nature of the transaction even when the product names stay the same.
Where different elements have different VAT rates or exemptions, escalate borderline cases before launch. The linked-goods withdrawal is not a licence to choose the most favourable rate; it is a prompt to apply the legislation and case law consistently.
Map the conclusion into every affected system: product master data, checkout, invoicing, credit notes, VAT return codes, finance reporting and customer-support scripts. Reconcile the VAT code to a sample of orders after release and keep an approval record showing who reviewed the classification. If an error is discovered, quantify the affected periods and follow HMRC error-correction rules rather than silently changing the code for future sales only. This operational trail helps show that the business applied one defensible policy to the same commercial facts.
Retain the decision with the VAT return working papers and review it at least annually.
For a defensible review, save the customer-facing offer as well as the legal analysis. Keep the product page, terms, basket behaviour, invoice, refund path and a sample order together because the commercial presentation can show whether an item is genuinely ancillary or independently supplied. Where an adviser changes the conclusion, date the change, identify the affected transaction period and update the VAT code, staff instructions and correction process consistently.
A practical VAT review checklist
Review a linked-goods package
- 1Describe the customer’s main objective and list every good or service included for the total consideration.
- 2Test whether each minor item is ancillary or whether the elements form one indivisible economic supply.
- 3Identify any element that has an independent use, customer choice, price or commercial purpose.
- 4If the supply is mixed, choose and document a reasonable consideration-apportionment method.
- 5Keep contracts, pricing, product pages, invoices and calculations that support the VAT treatment.
- 6Revisit the analysis after a material change to the package, customer journey, pricing or HMRC guidance.
Frequently Asked Questions
Did HMRC create a new VAT rule by removing the linked goods concession?
What is a linked good for VAT?
Does listing a free item separately make it a mixed supply?
When must a business apportion a single price?
Can a business keep using its old VAT treatment?
Does the linked-goods guidance decide the VAT rate of every package?
Should every business rewrite its invoices after RCB 1?
How should I analyse a package containing a main item and an ancillary item?
For the current policy, read HMRC Revenue and Customs Brief 1 and HMRC’s single and multiple supplies guidance.
Official sources
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Review notes and assumptions
Reviewed
2026-09-22
Assumptions
- This guide reflects HMRC Revenue and Customs Brief 1 (2026), published 8 January 2026, and the policy available on 20 September 2026; the actual facts and later HMRC guidance take precedence.
- The supply includes a main item or service and a minor linked article or service sold for a single consideration; separate supplies and sector-specific rules may need a different analysis.
- This guide explains the single-versus-multiple-supply framework and does not determine the VAT liability of a particular product, price or industry without reviewing its facts.