In Redwood Birkhall Limited v HMRC [2018] UKUT 0189, the Upper Tribunal (UT), concluded that the share of a group discount negotiated, and retained in part, by a company on behalf of multiple companies, was a VAT supply of services to those companies.

  • Redwood own and manage hotels and pubs.
  • Redwood entered into arrangements with other pubicans, whereby Redwood would use their barrelage as well as its own to enable it to negotiate larger discounts with breweries.
  • The brewers offered retrospective discounts per barrel where a minimum purchase level was achieved.
  • Redwood negotiated the discounts with the brewers and then shared this between the publicans and itself.
  • Redwood effectively kept part of the publicans discounts for itself in addition to its own share of the discount.
  • Redwood did not disclose its retained share of the discounts to the publicans.
  • The publicans were happy, as they achieved greater discounts after the retention, than they would have done on their own.

HMRC decided that Redwood had made a supply of services to the publicans, equal to the value of the publicans' discounts they retained. Redwood appealed.

The First-Tier Tribunal found in favour of HMRC. The UT upheld that decision:

  • Redwood provided a service of negotiating and adminstering an arrangement with the brewers whereby the purchases made with the publicans were aggregated along with Redwood itself, to achieve greater discounts. 
  • The economic reality is that the publicans did not take title to the barrels supplied by the brewers. This meant the amount they received could not be receipt of a discount on the purchase price, it must be consideration for a supply of Redwood's facilitation services. Redwood was not acting as a disclosed Agent for the publicans.
  • Although it will not appeal to Redwood, they will have to disclose their retention, at minimum to VAT-registered publicans.

The portion of the discounts that properly related to the barrels of the publicans, but which were retained by Redwood, is consideration for a supply of services.


Agents and principals

External link: Redwood Birkhall Limited v HMRC [2018] UKUT 0189


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