United Kingdom

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UK VAT: ‘Refer a Friend’ Schemes Could Face VAT Liability, Tribunal Rules

  • Retail energy suppliers and others with customer referral schemes may face VAT liabilities
  • A recent ruling found that a ‘refer a friend’ scheme operated by Bulb was a “service” and should be treated as non-monetary consideration for the supply of energy
  • This decision could result in significant additional VAT costs for companies if their schemes are not established to recognize non-monetary consideration
  • Bulb’s refer a friend scheme involved providing personalized referral links to customers, who would receive a referral amount credited against their energy bill if someone signed up using their link
  • Customers could extract the referral amounts as cash, but only a small percentage did so
  • Bulb accounted for VAT based on the payments received from customers, deducting the value of referral credits
  • HMRC challenged Bulb’s approach, arguing that the referral was non-monetary consideration and should be treated as additional consideration for the energy supplied
  • The First-tier Tax Tribunal ruled in favor of HMRC, citing the contractual reciprocity between Bulb and referring customers as the main reasoning


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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