In Lunar Missions Limited v HMRC [2018] TC06286, the First-Tier Tribunal (FTT) concluded that the receipt of funds raised on Kickstarter triggered an obligation to register for VAT. This decision was upheld by the UT in October 2019.
- Lunar Mission Limited raised £672,447 on Crowdfunding platform Kickstarter.
- Their aim was to land on the south pole of the Moon, dig to research the deeper lunar rocks and whilst there bury a time capsule.
- For pledges of £60 or more, the backer would get a voucher up to the value of their pledge for a space in the time capsule. This space could be digital or physical.
- The digital space would be a space for upload of files chosen by the backer.
- The physical space would be of a size to enable a single hair to be put in a box in the capsule.
- HMRC said that the company had to compulsorily Register for VAT and the company appealed.
Initially the company believed that there was no taxable supply in return for the funding, however, it conceded that, as rewards were given to backers, there was a taxable supply in the form of those rewards.
The key issue was therefore the Time of supply:
- If the amounts pledged were prepayments for goods or services, then the time of supply is the date of the payment.
- Alternatively, the supply could be of face value vouchers. If face value vouchers, the issue is then whether the vouchers are multi-purpose (MPV) or single-purpose (SPV):
- MPVs are subject to VAT on redemption, presumably near to launch which was proposed for 2024.
- SPVs are subject to VAT on purchase.
The FTT found that although the pledges triggered a contract for the company to provide backers with the offered rewards, at that time there was not enough certainty about what would be provided. There was no precise identification of the goods and therefore, they are not prepayments.
The FTT also found that the amounts paid in exchange for the vouchers, gave the backers a right to receive something up to the value of the pledge. This meant that they satisfied the conditions to be face value vouchers.
The FTT then considered whether the vouchers were SPVs:
- SPVs are vouchers which are redeemable against a “one type” of goods or services and the goods are subject to a single rate of VAT.
- There is no information available and no steer from government as to the meaning of the words “one type of goods”.
- In this case, the space in the time capsule whether digital or physical was said to be one type of goods. i.e. space in the time capsule.
- There is no relevant distinction for VAT purposes between digital and physical space in a time capsule. Compare this to books, there is a clear distinction between physical zero-rated books and standard rated e-books.
- In this instance it was a SPV.
The date the funds were paid from Kickstarter to the company was the time of supply for VAT purposes, and therefore there was an obligation to register for VAT due to the funds raised.
The appeal was dismissed.
Comment
As noted above the company appealed to UT and lost that appeal. The UK widened its defintion of SPVs on 1 January 2019.
Links
Discounts, rewards and vouchers
External link Lunar Missions Limited v HMRC [2018] TC06286
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