Total UK Ltd v Revenue & Customs

Where a supplier’s sales promotion scheme requires it to transfer money or money’s worth to a customer after supplies have been made, the taxable consideration may be reduced by the value of what the supplier transfers. The analysis depends on the substance and contractual terms of the scheme, not on whether the benefit is labelled a refund or is provided in cash.

A voucher is not money, but a reduction in kind can reduce taxable consideration where its monetary value is clear. The transfer may form part of the supply chain for the earlier supply even if the voucher also relates to a separate retail transaction. The principle of VAT neutrality prevents taxation of more than the supplier’s true proceeds.

Total operated the TOPS sales promotion scheme. Customers purchasing sufficient quantities of fuel accumulated points and could obtain retail vouchers. Total bought the vouchers in advance at a discount and transferred them to qualifying customers without further payment.

Total appealed against a decision of the VAT and Duties Tribunal dated 17 March 2006. The Tribunal had rejected Total’s claim that the cost of vouchers transferred under the scheme reduced the consideration for its fuel supplies and therefore its output tax. The central issue was whether the transfer of vouchers constituted a reduction of the consideration for earlier fuel supplies under the domestic legislation and the Sixth Directive.

1. Appeal allowed. The Tribunal’s decision was incorrect. Total’s transfer of vouchers, rather than its earlier purchase of them, was the relevant event. The transfer occurred because of the terms on which qualifying fuel purchases had been made.
2. Article 11A(1)(a) of the Sixth Directive required the taxable amount to reflect the consideration actually obtained by the supplier. The principle explained in Elida Gibbs Ltd v CCE, Case C317/94, [1996] STC 1387, applied. A supplier’s obligation under a sales promotion scheme to part with money or money’s worth to a consumer or intermediary reduces the consideration on which it is finally liable to VAT.
3. The result did not depend on express reduction labelling. The economic and contractual substance of the TOPS scheme showed that Total transferred vouchers because the customer had purchased sufficient fuel. The transfer was therefore part of the supply chain that included the fuel supply, even though the voucher was also connected with a retailer’s later supply of goods.
4. A voucher was not money, but it was money’s worth represented by a right to have the price payable to a retailer satisfied by its face value. There was no legal principle preventing a reduction in kind from reducing taxable consideration where the monetary element was clear. Total claimed only the £4.50 cost of each £5 voucher, so no valuation issue arose.
5. The “two economic transactions” reasoning in the CJEC’s decision in Kuwait Petroleum GB Ltd v CCE, Case C48/97, [1999] STC 488, concerned whether redemption goods were supplied free of charge under article 5(6). It did not prevent a later voucher transfer from reducing consideration for earlier fuel supplies. The contrary reasoning of Laddie J in the same litigation, reported at [2001] STC 62, was not persuasive and was rejected.
6. A reference to the CJEC was unnecessary. The relevant Community-law principles had already been explained, and applying them to the facts was a matter for the national court.

VAT and Duties Tribunal: decision dated 17 March 2006; Total’s appeal was dismissed.

High Court (Chancery Division): the Tribunal’s decision was reversed and Total’s appeal was allowed.