Tax Case - Discounts 2010 UKFTT 621TC
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Revenue & Customs  UKFTT 621 (TC)
Appellant supplies home improvement products
and services to members of the general public. Specifically, the
Appellant is a
well-known supplier and fitter of double-glazing and other related home
improvement products and services, such as replacement windows, doors
conservatories, mainly to the general public.
can choose to pay for the Appellant’s supply by paying a deposit and
taking out a loan with Clydesdale Financial Services Ltd
subject to receiving credit approval.
Appellant’s experience, the order value is
higher if funded by credit than if paid in cash by the customer. In
if the customer opens a loan account with Clydesdale, the Appellant
commission from Clydesdale. Clydesdale can recover any commission paid
Appellant if the customer settles the loan account within 4 months of
advance date. Clydesdale
also pays the
Appellant the full net cash price of the Appellant’s home improvement
the customer, i.e. the full price minus the deposit paid by the
Appellant’s promotional literature from time
to time makes reference to various discounts and promotions offered.
promotional offer was a “cash back” of 10%: the Appellant represents to
customers that if they open a loan account and keep it open for at
days after the loan is taken out, the Appellant will pay the customer
the amount of the loan. This is described by the Appellant as a ‘cash
Appellant’s practice was to adjust its VAT
account to reduce its VAT liability if it paid 10% of the loan amount
customer, as it treated the amount paid to the customer as a reduction
customer’s consideration for its supply.
agreed that the above arrangements give rise
to three distinct supplies:
there is a home improvement supply from
the Appellant to the customer. The consideration for this supply is the
by the customer to the Appellant.
Secondly, there is the exempt supply of credit
by Clydesdale to the customer. The consideration for this supply is the
of interest from the customer to Clydesdale.
Thirdly, there is the supply of introduction
services from the Appellant to Clydesdale, i.e. the introduction of the
Appellant’s customer by the Appellant to Clydesdale. The consideration
supply is the payment of commission from Clydesdale to the Appellant.
to the Appellant on 24th
April 2006 and informed it that they considered that the “cash back”
an inducement for the customer to enter into a loan agreement with a
party. The Respondents therefore stated that the Appellant was not
reduce the value of its supply by the value of the payments made to
under the “cash back” scheme.
considered all of the facts The Tribunal
found in favour of the Appellant and agreed that the ‘cash back’ was a
and the VAT due on the transaction had been properly reduced.
About the Author
Andrew Needham is a Director of VAT Specialists Limited,
headed by Chartered Tax Adviser Andrew Needham who has a degree in Law from UCNW
Bangor and is a specialist in indirect taxes. Andrew has over 20 years
experience in VAT having spent 7 years in HM Customs & Excise, firstly as a VAT
inspector, then as a departmental trainer, and finally in a headquarters policy
unit dealing with the introduction of the EU single market.
VAT Specialists Limited, 31 Bisham Park, Runcorn, Cheshire WA7 1XH.
(E) Andrew Needham BA CTA
(T) 01928 571207
(F) 01928 571202
(M) 07810 433 926
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Article Published/Sorted/Amended on Scopulus 2011-01-13 17:48:53 in Tax Articles