In Marks and Spencers plc v HMRC [2018] TC06471, the First-Tribunal (FTT) found that the free wine in the 'dine in for £10' offer is not a gift and part of the cost of the deal must be standard rated.
The M&S Promotional scheme entitled customers to a main, side, and dessert, with a free bottle of wine for £10.
- M&S had been offering a 'Dine In for £10' offer for some time but wanted to refresh it. Instead of being a main, side, dessert, and wine for £10, it would be main, side, and dessert for £10, with a free bottle of wine.
- HMRC and M&S did not agree on how it should be subjected to VAT. HMRC assessed M&S for nearly £12 million.
- M&S appealed. They believed that the wine was supplied for nil consideration so no VAT was due and that the Food, was supplied for £10 and was zero-rated.
The FTT found in favour of HMRC:
- The wine was not supplied free as M&S contend.
- The wine was offered conditionally. A customer could only obtain it by paying £10 and taking the food items. Effectively this meant is was supplied for consideration.
- Even though customers could choose not to take the wine and the price for the food would still be £10, this did not mean that the wine was free.
- The term 'free' was being used in a marketing sense, in the same way as 'buy one get one free'.
- The economic and commercial reality was that M&S were offering a package of items for £10.
- The consideration of £10 has to be apportioned on an appropriate basis between zero-rated food items and the standard rated wine. Typically this would be apportioned on a cost basis or normal retail selling price basis.
Even if there was not a supply of wine for consideration, the FTT concluded there would still be a deemed supply for VAT as it was a transfer out of business assets. It was not a gift, so the Gift exemption does not apply. This deemed supply has to be given a value, which would then trigger a VAT charge at the standard rate.
Had M&S won, the whole supply would have been zero rated and the wine would have been treated as having been supplied for nil consideration.
Links
Discount, Reward Schemes & Vouchers: VAT
Gifts & samples - VAT repayment claims?
External link Marks and Spencers plc v HMRC [2018] TC06471
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