Shooting for the moon eclipsed by VAT vouchers

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Neil Warren finds a mission to investigate the geological composition of the moon was grounded by the complexity of VAT on the rewards promised to the scheme investors.  

Aiming high

The business proposition of Lunar Missions Ltd (TC06286) was to raise £600,000 in order to send a robot to drill 20 meters into the surface of the moon, and thus collect important scientific data. It raised the money through crowdfunding on Kickstarter.

An investor making a crowdfunding payment of £60 received the promise of digital or physical space in a time capsule to be buried on the moon at some time in the future, if the project was successful. The physical space was intended to be enough to include a strand of hair, the digital space offered could include photographs.

What are the VAT issues surrounding the investor’s £60 payment? Did the advance payment create a tax point for Lunar Missions Ltd, because it related to the future supply of goods or services? Or did the payment effectively give the investor a face value voucher for future rewards, which has separate VAT consequences?

Face value vouchers

The VAT rules for face value vouchers were clarified in 2012 following the CJEU case of Lebara Ltd (C-520/10), which led to Revenue & Customs Brief 12/12 issued on 10 May 2012:

  1. If the voucher can only be used for a ‘single purpose’, then the output tax is payable at the time that payment is made by the customer. This is the same outcome as for an advance payment.
  2. If the voucher can be used for more than one purpose, VAT is only payable once the voucher is redeemed. In the Lunar case, the redemption of the voucher would not happen until at least 2024 when the mission to the moon was to be launched.


A publisher issues vouchers that can either be used to buy hard copy books or e-books. This is clearly a multi-purpose voucher. If the voucher could only be used to buy hard copy books, or e-books, rather than both, it would be a single purpose voucher.

Taxpayer’s argument

The representatives of Lunar argued that there was no advance payment of goods or services (a prepayment) because the arrangement was dependent on too many outcomes. They admitted there was no guarantee that the project would be successful. Lunar’s other argument was that the choice given to the investor of having either physical or digital space in the time capsule (or a combination of both) meant the voucher did not qualify as a single purpose voucher. If it was a multi-purpose voucher no VAT was payable until the investors received their rewards.

HMRC’s argument

HMRC argued that the payment by the investor represented a prepayment situation. If the court disagreed with that approach, HMRC contended that the voucher was for a single purpose ie space in the time capsule. The distinction between physical and digital space was irrelevant.

Tribunal decision

The court rejected HMRC’s argument that the payments from investors amounted to a prepayment. It also dismissed Lunar Missions’ view that the vouchers were for multi-purposes. The tribunal concluded that the promises to investors were single-purpose vouchers and that VAT was due at the time the payment was made by the investors.

The payments received from the funders (£670,000 in total) thus created a liability for VAT registration in December 2014 when the payments were received via the crowdfunding website Kickstarter.

To quote from the tribunal report: “There is no relevant distinction for present purposes between physical space and digital space, unlike the distinction between a physical book and an e-book. The digital space would itself require a physical medium on which to be held. Hence the more digital information uploaded the greater the physical size of the memory required.”

Not rocket science

This is another example of how our creaking VAT system, invented in a pre-digital age, is not equipped for modern world transactions.

It seems very harsh that Lunar Missions Ltd will have to pay output tax on the money received for a project that has so many ‘ifs and buts’ regarding its successful delivery. However, the investors paid their money in anticipation of receiving the rewards on offer, so the payments were clearly not donations, bringing them into the mysterious world of the nation’s favourite tax.

About Neil Warren

Neil Warren

Neil Warren is an independent VAT consultant and author who worked for Customs and Excise for 14 years until 1997.


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