VAT Treatment of ‘Refer a Friend’ Scheme: First-tier Tribunal Rules Against Simple Energy Limited

• Bulb offered a ‘refer a friend’ scheme to attract new customers
• New customers received a £50 reward and a unique link to share with friends
• For every friend that signed up through the link, the referrer received an additional £50 reward
• HMRC believed that the VAT treatment of the two rewards was different
• The initial £50 was considered a discount on Bulb’s energy charges
• The further £50 for recruiting a friend was considered consideration for a supply made to Bulb
• The First-tier Tribunal agreed with HMRC’s view
• The reward had to be directly linked to something the referrer did for Bulb
• Simply forwarding an email to friends required little effort but was dissociable from the referrer’s status as a Bulb customer
• The refer a friend reward should not be treated as a discount
• Bulb’s appeal was dismissed.

Source:

• Deloitte
• Link to the case law

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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