HMRC wins split decision in voucher case


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The Upper Tribunal has partially upheld HMRC’s appeal against Associated Newspapers in a complex case involving a voucher-based business promotion scheme.

In HMRC v Associated Newspapers [2015] UKUT 641, the Upper Tribunal (UT) found that Associated Newspapers was only permitted to recover input tax in relation to vouchers supplied by intermediaries.

Associated Newspapers (ANL), which publishes the Daily Mail and Mail on Sunday, ran a promotional scheme offering readers the opportunity to buy its newspapers for half price. Readers were supplied with coupons redeemable at newsagents. If readers took delivery of newspapers at home for three months they were then entitled to a voucher – typically £5 worth of high street vouchers – purchased by ANL. Newsagents were also provided with vouchers.

ANL recovered input tax on the supply of the vouchers but did not account for output tax. HMRC argued that output VAT was due on a deemed supply of services, and also that ANL was not entitled to reclaim VAT charged to it on the purchase of the vouchers. For both issues the First-tier Tribunal (FTT) found in favour of ANL.

HMRC appealed the rulings, and although the UT agreed that the FTT's decision regarding the purchase of vouchers from intermediary suppliers was correct in terms of input tax, and ANL was entitled to reclaim the VAT charged, under UK VAT law where vouchers are purchased from retailers no VAT is actually chargeable. Therefore no input VAT can be reclaimed, and the UT upheld HMRC's appeal in relation to the retailer vouchers.

Regarding the question around output tax, the UT did not agree with HMRC’s assertion that as the vouchers were given away to customers this was a use for non-business purposes, backing the FTT's decision.

Under current UK VAT law, output VAT is due if the services in question are used for non-business or private purposes. ANL’s providing the vouchers for its customers free of charge as part of their promotion scheme was for a business-related purposes, and therefore the UT judged that there was no deemed supply of services and no output VAT was due.

Commenting on the case Karen Robb, VAT and Indirect Tax Partner at Grant Thornton, said: “Business promotion schemes often create difficulties from a VAT perspective. Similarly, VAT in connection with vouchers is equally complex. This case involved a combination of both issues. The case confirms that, where a service is purchased (here the vouchers), and is given away under a promotion scheme free of charge, the service is not 'used for non-business purposes'. As such, there can be no deemed supply.”


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18th Jan 2016 14:43

Face Value Vouchers

A company buys vouchers from an intermediary supplier and pays Vat on purchase then goes on and sells it to end consumer. Will the supply to end consumer vatable or outside the scope of Vat? He will get a Vat inclusive Invoice when paying for the goods with the Voucher

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