Tribunal Rules RAF Credits Are Non-Monetary Consideration for VAT Purposes

Citation: [2023] UKFTT 976 (TC)
Judgment on


In the case of Simple Energy Limited v The Commissioners for HMRC, the First-tier Tribunal (Tax Chamber) examined the legal intricacies surrounding the application of value added tax (VAT) on referral credits awarded to customers as part of an energy supplier’s “refer a friend” (RAF) scheme. The analysis centered around whether these referrals constituted non-monetary consideration that would necessitate a VAT charge on the value of the consideration given for a supply of energy.

Key Facts

Simple Energy Limited, operating under the name Bulb, supplied energy to customers and incentivized existing customers to refer new customers through a RAF scheme. Both referrers and recruits received credits against their energy charges upon successful referrals. The key issue was whether the RAF credits amounted to non-monetary consideration for VAT purposes, as contended by HMRC, or whether they simply represented price discounts leading to lowered energy supply values, as argued by Simple Energy Limited.

The Tribunal applied several legal principles established by prior case law:

  1. Consideration and Direct Link: In accordance with the ECJ rulings in Staatssecretaris van Financiën v Coöperatieve Aardappelenbewaarplaats (C-154/80) and Apple and Pear Development Council v Customs and Excise Commissioners (C-102/86), a supply of services is taxable if there is a direct link between the service provided and the consideration received.

  2. Reciprocal Performance: Following Tolsma v Inspecteur der Omzetbelasting Leeuwarden (Case C-16/93), a supply of services is taxable only if there is reciprocal performance, meaning the remuneration by the service provider is directly linked to the service supplied to the recipient.

  3. Taxable Amount Adjustments: Article 90 PVD and Elida Gibbs Ltd v Customs and Excise Commissioners (C-317/94) imply that the taxable amount should reflect the sum actually paid by the final consumer, and any reduction after the fact will adjust the taxable amount accordingly.

  4. Substance Over Form: As seen in cases like Everest Ltd v HMRC, [2010] UKFTT 621 (TC), the Tribunal emphasized that the form in which a payment or credit is made (whether as a straight discount at the time of supply or a cashback later) should not affect its VAT treatment.

  5. Objective Analysis: Echoing the approach in the South African Tourist Board case, the Tribunal conducted an objective analysis of the transaction, considerate of all surrounding circumstances and emphasizing contractual documentation.


The Tribunal found in favor of HMRC, dismissing Simple Energy Limited’s appeal. It ruled that the services rendered by customers under the RAF scheme amounted to non-monetary consideration, as they constituted a direct link between the referred action and the reward credit provided by Bulb. Referrals involved more than mere behavioral shifts; they required customers to actively engage and perform actions with potential commercial benefits to Bulb, thereby fulfilling the reciprocal performance requirement for a taxable supply of services.


In conclusion, the Tribunal underscored that non-monetary consideration in VAT terms encompasses a wide range of activities beyond those of direct financial value, so long as they are part of the agreed transaction between the supplier and recipient. The VAT chargeability hinges on the interplay between the actions of the parties and the reciprocity in their relationship, as opposed to the mode of reward delivery. This case is instrumental for legal professionals in recognizing the broad scope of VAT considerations, particularly in the context of modern referral schemes and similar commercial incentives.

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