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13th February 2014
business promotion schemes create a number of unique issues from a VAT
perspective. Over recent weeks there have been a number of VAT cases
A recent case
considered vouchers (referred to as ‘secret money’) provided to
lap dancing or table dancing clubs to spend when they run out of cash.
a customer wanted to purchase £100 of vouchers their credit card would
debited £120, the taxpayer would then treat the £20 as a standard rated
If a customer
redeemed £100 of vouchers with a self-employed dancer, the club would
20% commission when the voucher was exchanged for cash by the dancer.
club contended that the 20% retained was for an exempt supply of
credit guarantees or any other security in money’. The total VAT at
accepted that if each step of the process was considered individually
liability would support the taxpayer’s case. However, the Tribunal
concluded that there was a single supply of services by the taxpayer to
dancers, which is paid for by means of entrance fees and the premium in
money. The premium was effectively providing the dancers with access to
the non-cash customer market and the facility to exploit that market
taxpayer’s premises and using its resources.
This case is interesting as the Tribunal
has acknowledged that a charge for the swapping of vouchers for
currency is a VAT exempt supply, however they have then taken the view
amount being retained by the taxpayer is for something completely
If you or your clients are considering new
business promotion schemes or voucher payment methods, we must stress
importance of considering the VAT implications carefully. Although on
hand the scheme you are creating may appear to be a great marketing
it is essential to identify any potential VAT costs in relation to it.
About the Author
VAT People are leading VAT and Customs Duty
consultants based in the
North West of England. We work with a wide range of businesses
throughout the UK as well as assisting our accountancy colleagues to
unravel the thorny VAT issues for their clients. We are one of the UK's
largest and most comprehensive sources of VAT and Customs advice, our
consultancy team having over 140
years of experience in VAT and Customs
gained in either HMRC or a Big 4 accountancy practice environment.
Call us on our VAT helpline 0800 077 4604 to discuss. All initial discussions are free with no-obligation.
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Article Published/Sorted/Amended on Scopulus 2014-02-19 09:05:42 in Tax Articles