‘Refer-a-friend’ discount found to be subject to VAT

• The recent FTT case of Simple Energy, involving Bulb Energy’s ‘refer-a-friend’ credit, ruled that the credit was not a discount for VAT purposes, but part of the taxable value of Bulb’s supply of domestic energy.
• This suggests HMRC may be targeting and assessing VAT on similar credits treated as discounts.
• The case involved a dispute over the VAT treatment of a credit given to existing customers.
• HMRC argued that the credit was part payment for a service provided by the customer, and the FTT ruled in favor of HMRC.
• This decision could have implications for businesses using similar customer reward schemes, as they may need to review their VAT position.
• Additionally, the case highlights the wider VAT implications of non-monetary consideration in barter transactions, which may require complex valuation exercises to calculate the tax payable.

Source RSM

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