HM Revenue & Customs v Total UK Ltd

For VAT purposes, a customer loyalty scheme does not reduce the consideration for fuel merely because qualifying purchases later entitle the customer to a voucher. The scheme must be analysed objectively, having regard to its documentation and economic purpose. A voucher providing additional goods, services or charitable value is materially different from a monetary refund or rebate on the price previously paid. The cost of acquiring vouchers is a business expense promoting sales, not a reduction in the consideration for fuel. Fiscal neutrality does not require schemes with different legal and economic structures to receive identical VAT treatment.

Total operated a customer loyalty scheme under which customers earned points through qualifying fuel purchases and could redeem 5,000 points for a £5 retailer gift voucher or a charitable gift voucher. Total purchased the vouchers at a discount and claimed that their transfer retrospectively reduced the consideration for fuel supplies under article 11 of the Sixth Directive.

The VAT tribunal rejected that claim. Sir Andrew Park, sitting in the Chancery Division, allowed Total’s appeal: [2006] EWHC 342 (Ch). The Commissioners appealed to the Court of Appeal. The central issue was whether the later transfer of a voucher reduced the consideration obtained for the earlier fuel supplies.

1. Appeal allowed. The tribunal’s decision was reinstated.
2. The transfer of a TOPS voucher was not a retrospective discount or rebate on the price of fuel. The scheme documentation presented the points and vouchers as something extra obtained through participation, not as money-off or cash-back. An objective analysis also showed that TOPS was designed to encourage repeat purchases at the full pump price.
3. The customer paid the full pump price whether or not he joined TOPS or earned enough points to qualify for a voucher. The voucher could be used only to acquire later goods or services from selected retailers, or to make a charitable gift. It was therefore materially different from a monetary refund or rebate.
4. Elida Gibbs Ltd v Customs and Excise Commissioners [1996] STC 1387 did not require a different result. That case concerned an established discount scheme reducing the price paid by consumers for specific goods, despite the discount being funded across a supply chain. It did not establish that every later payment or benefit connected with a supply transaction reduces the supplier’s taxable consideration.
5. The fuel supply and voucher transfer were separate transactions and formed separate supply chains for VAT purposes. The contractual link between qualifying fuel purchases and voucher entitlement was insufficient to make the voucher a discount on the fuel price.
6. The cost of purchasing vouchers was analogous to the commission in Customs and Excise Commissioners v Primback Ltd [2001] STC 803: it was a cost of operating a sales-promotion scheme, comparable to financing, advertising or rent, rather than a reduction in consideration.
7. Fiscal neutrality did not assist Total. Different VAT consequences for schemes that were not identical were inherent in the Sixth Directive and did not, without more, establish distortion of competition. No reference to the European Court of Justice was necessary because the governing principles were sufficiently clear and the issue was their application to the facts.

• Court of Appeal (Civil Division) — appeal allowed; the tribunal’s decision was reinstated.
• High Court, Chancery Division — Sir Andrew Park allowed Total’s appeal from the VAT tribunal: [2006] EWHC 342 (Ch).
• VAT and Duties Tribunal — rejected Total’s claim that voucher transfers reduced the taxable consideration for fuel.