UK VAT on free vouchers

The UK’s Upper Tribunal court has ruled that output VAT is not due on free promotional vouchers at the time of their offering.

The case concerned free retail vouchers given as a sale promotion by Associated Newspapers (AN) to help increase sales of its newspapers. The vouchers were purchased by AN from major retailers, including Marks and Spencer’s.

The UK’s tax authorities, HMRC, contended that VAT was due when the vouchers were given away. The court, following an earlier ruling by the First-tier Tribunal Court, disagreed. Secondly, the court also held that AN was entitled to recover the input VAT it suffered when it purchased the vouchers from the retailers.