VAT retail scheme – High Court decision
The High Court has reversed an earlier decision of the VAT Tribunal concerning a large chemist chain. The chemist issued vouchers when more that £15 worth of goods were purchased which entitled the customer to a £5 credit which could be used against the value of specified brands purchased on a subsequent visit. If the value of goods was less than £5 the credit could be used but no change was given.
The High Court were examining whether there was a binding agreement to allow an amendment to a bespoke retail scheme (operated by large retailers). The case was taken by HMRC who had repaid the chemist a substantial amount of VAT overdeclared in connection with the £5 voucher (referred to as a coupon). HMRC subsequently issued a recovery assessment on the basis that no payment was made for the coupon when it was issued.
The High Court found that the Tribunal had erred and found it was clear that HMRC could not have sanctioned the VAT repayment had it adhered to a correct view of the bespoke retail scheme. The appeal by HMRC was upheld. Any business which operates a bespoke retail scheme should make themselves aware of the facts of this case which allowed HMRC to successfully defend a recovery assessment.