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Simple Energy Limited v The Commissioners for HMRC

[2023] UKFTT 976 (TC)
Bulb Energy gave customers credits for referring friends. HMRC said these credits were payment for a service (referring friends), so Bulb had to pay VAT on them. The judge agreed. Even though referring friends was easy, it was a service provided to Bulb in exchange for a lower energy bill. It's like getting a discount for doing something extra, not just for buying something.

Key Facts

  • Bulb Energy Limited's "refer a friend" (RAF) scheme offered credits against energy charges to both referrers and recruits.
  • The appellant (Simple Energy Limited, Bulb's parent company) appealed HMRC's decision that successful referrals constituted non-monetary consideration for energy supplied to referrers.
  • Referrers received a £50 credit (or £25 for a single energy supply switch) if a recruit switched their energy supply using their referral link.
  • The vast majority of customers (over 90%) treated the credit as a discount on their energy bill, with only about 10% opting for cash payment.
  • Bulb's marketing materials promoted the RAF scheme as a way for customers to save money on their energy bills.
  • Bulb's terms and conditions referred to the credit as a "reward", not a discount.

Legal Principles

A provision of services is taxable only if there's a direct link between the service and consideration received, capable of being expressed in money.

Staatssecretaris van Financiën v Coöperatieve Aardappelenbewaarplaats (C-154/80)

Mandatory charges imposed by statutory obligation are not consideration for a supply.

Apple and Pear Development Council v Customs and Excise Commissioners (C-102/86)

A supply of services is taxable only if there's a legal relationship with reciprocal performance.

Tolsma v Inspecteur der Omzetbelasting Leeuwarden (Case C-16/93)

The taxable amount cannot exceed the sum paid by the final consumer.

Elida Gibbs Ltd v Customs and Excise Commissioners (C-317/94)

A direct link must exist between the supply and consideration received, including non-monetary consideration.

Naturally Yours Cosmetics Ltd v Customs and Excise Commissioners (C-230/87)

Non-monetary consideration can include actions beyond a simple transaction; there must be reciprocity.

Empire Stores Ltd v Customs and Excise Commissioners (C-33/93)

A discount is given for satisfying a contingency, not for providing a service; the customer must be carrying on something in the nature of an economic activity.

Everest Ltd v HMRC , [2010] UKFTT 621 (TC)

For non-monetary consideration, there must be a direct link between the action and the consideration; the recipient must provide something to the supplier.

Various cases discussed including Mirror Group, Boots, and Littlewoods

Outcomes

Appeal dismissed.

The Tribunal found that successful referrals constituted non-monetary consideration for energy supplied to referrers, satisfying the tests for contractual reciprocity.

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