Everest Ltd v Revenue & Customs [2010] UKFTT 621 (TC) (01 December 2010)

Everest Ltd v Revenue & Customs [2010] UKFTT 621 (TC) (01 December 2010)

The Tribunal found that the cashback payments made by Everest Ltd to customers who took out and maintained a specified loan were not discounts or rebates reducing the taxable amount for the home improvement supplies. Instead, the cashback was an inducement to enter into and maintain the loan agreement, and thus not a reduction in the consideration for the taxable supply. The correct VAT treatment is to exclude the cashback from any reduction in the taxable amount for the supply of goods and services by Everest Ltd.

Citation
[2010] UKFTT 621 (TC)
Parties
Appellant: Everest Limited; Respondents: The Commissioners for Her Majesty’s Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
01 December 2010
Procedural Posture
VAT Appeal / First Tier Tribunal (tax), Substantive Decision
Outcome
Appeal dismissed
Legal Topics
VAT Consideration, Discounts and Rebates, Cashback Schemes, Taxable Amount Determination, Article 11(c)(1) Sixth Directive
Tax Law European Union Law VAT Consideration Discounts and Rebates Cashback Schemes Taxable Amount Determination Article 11(c)(1) Sixth Directive

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Parties

Everest Limited

Appellant

The Commissioners for Her Majesty’s Revenue and Customs

Respondents

Procedural Posture

VAT Appeal / First Tier Tribunal (tax), Substantive Decision

Legal Issues

  1. 1 Whether cashback payments made by Everest Ltd to customers constitute a discount/rebate reducing the taxable amount for VAT purposes or are a separate inducement/payment for entering and maintaining a loan agreement.

Ratio Decidendi

The Tribunal found that the cashback payments made by Everest Ltd to customers who took out and maintained a specified loan were not discounts or rebates reducing the taxable amount for the home improvement supplies. Instead, the cashback was an inducement to enter into and maintain the loan agreement, and thus not a reduction in the consideration for the taxable supply. The correct VAT treatment is to exclude the cashback from any reduction in the taxable amount for the supply of goods and services by Everest Ltd.

Court Disposition

Appeal dismissed

Orders

  • Everest Ltd is not entitled to reduce the value of its supply by the value of the cashback payments for VAT purposes.
  • The assessments to VAT by HMRC are upheld.