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