Weekly VAT News

Autumn Statement 2023 – indirect tax measures

There were a number of indirect tax measures announced in the Autumn Statement 2023 and accompanying Overview of tax legislation and rates. VAT measures announced included the zero rating of reusable period underwear, and extending the zero-rating for the installation of energy-saving materials to additional technologies and to include buildings used solely for a relevant charitable purpose. Customs measures included extending the import tariff suspension on certain goods for five years and additional support for small- and medium-sized businesses through UK Export Finance. There was also a freeze to Alcohol Duty rates, an increase to Tobacco Duty rates, and confirmation of increases to rates of Aggregates Levy, Air Passenger Duty, Landfill Tax, Plastic Packaging Tax, and Vehicle Excise Duty. Also, it was announced that there will be consultations on the VAT treatment of private hire vehicles, following the High Court ruling in Uber Britannia Ltd v Sefton Metropolitan Borough Council, and on proposals to bring remote gambling into a single tax, rather than taxing it through a three-tax structure. Further details on all the indirect tax measures from the Autumn Statement can be found on TaxScape. A recording of our Dbriefs webcast on the Autumn Statement is available to watch on demand. (Contact: Andrew Clarke)

Gap Group Ltd: single or multiple supplies of plant hire – FTT

GAP Group Ltd hired dumpers, diggers, excavators and a wide range of other plant to construction companies, generally for around six weeks at a time. Like many car hire companies, GAP Group dropped off any diesel-powered plant with a full tank of fuel, and the customer could either return it after topping up the tank, or pay GAP Group for the fuel that it used. The First-tier Tribunal has ruled, applying the tests in Middle Temple, that GAP Group’s supplies of fuel when the plant was returned were separate from the hire. GAP Group charged a premium rate for fuel, which prompted most customers to return the plant with a full tank. Charges for fuel therefore made up only 3.4% of GAP Group’s total turnover. These charges were calculated at the end of the hire period, indicating that they should not be treated as part of the plant hire whose rate was agreed at the outset. Consequently (until April 2022, when the use of red diesel in construction equipment was prohibited), GAP Group’s supplies of diesel qualified for the reduced rate of VAT, as it was providing less than 2,300 litres of fuel which meant that the fuel was deemed to be provided for ‘domestic use’ (under Note 5 to Group 1, Schedule 7A, VATA 1994). (Contact: Oliver Jarratt)

Simple Energy Ltd: VAT treatment of ‘refer a friend’ scheme – FTT

New customers who signed up with Bulb for gas and electricity were not only given a £50 reward, but were also emailed a unique link that they could share with their friends. For every friend (‘recruit’) that signed up with Bulb through this link, the customer (‘referrer’) received a further £50 reward. This ‘refer a friend’ scheme was one of Bulb’s most successful methods of attracting new customers, accounting for between 20% to 33% of sign-ups in 2018-2022. In HMRC’s view, the VAT treatment of the two rewards was different. The initial £50 received by the customer for signing up was a discount against Bulb’s energy charges. However, the further £50 deducted from their bill each time the referrer successfully recruited a friend for Bulb represented consideration for a supply they made to Bulb and could not be treated as a discount. The First-tier Tribunal agreed. There had to be a direct link between the reward and something that the referrer did for Bulb (rather than something that the recruit might later do). However, the threshold for what the referrer had to do for their reward was low. Simply forwarding an email to some friends required little effort, but it was dissociable from the referrer’s status as a Bulb customer. Consequently, the refer a friend reward should not be treated as a £50 discount from the price of gas and electricity supplied by Bulb. Bulb’s appeal was dismissed. (Contact: David Walters)