If, under the party plan system, a VAT-registered business sells to unregistered representatives or demonstrators, their profit margin escapes VAT when they resell – unless and until HMRC issues a direction (VATA 1994, Sch. 6, para. 2).
Direction to account for VAT at retail price
It is up to HMRC to direct that the suppliers account for VAT at the full retail selling price in order to avoid such a loss. This power, which is in VATA 1994, Sch. 6, para. 2, is a derogation from Directive 2006/112, art. 73.