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Tax for Basket with Coupon containing two different VAT rates
The vendor needs to do this using apportionment, according to the VAT rules for mixed supplies: If you make mixed supplies and the individual supplies are not liable to VAT   at the same rate then you need to work out the tax value of   each supply in order to calculate how much tax is due. If the tax   value is based on the total price you charge (see paragraph 7.3) you   do this by splitting that price between the supplies. This is called   an apportionment ... There is no special method of apportionment ... However, your calculations must be fair and you must be able to justify them. It is usually best to use one of the methods shown in section 32. The section 32 referred to really relates to apportioning use between business and non-business purposes, but it implies that splitting up the total price in proportion to the original prices would probably be fair. So in your example the vendor might split the £5 discount equally between the spoon and the carrycot as they had the same gross cost, and pay VAT as if each had cost £7.50 gross. The vendor could also do it in proportion to their net (pre-VAT) prices and thus apportion a bit more of the discount to the carrycot than the spoon, but as this would lead to them paying slightly more tax overall they probably wouldn't choose to. However, none of this is likely to be too relevant to a consumer, since in the UK prices must be presented as the gross (VAT-inclusive) amounts and so the discounts will also apply to those amounts. It will of course affect how much of the purchase price the vendor ends up paying on to the government and thus might indirectly affect what discounts the vendor is willing to offer.