In Marcandi Ltd v HMRC [2018] C-544/16, the CJEU ruled that the bid credits sold by ‘Madbid’ to penny-auction participants are supplies of services, not part of the supply of goods.

  • Madbid was a penny auction site. Users bought bid credits for 15-35p, which enabled them to bid on various auctions.
  • When a bid was made on auctioned goods, a timer was reset and the price increased by 1p. The bid would use up one of the users credits.
  • If the timer ran out the previous bidder would win the goods for the price stated.
  • The auction losers would be able to use the cost of the bid credits they had used up to set against the RRP of the goods from the Madbid online shop (the earned discount).

HMRC were of the view that the sale of credits triggered a UK VAT liability as it was a Supply of services not goods and as it was a business to consumer (B2C) supply of services, the Place of supply was the UK.

Marcandi’s view was that the credits were a preliminary transaction relating to the goods and part of that supply of goods. This meant that the Place of supply of goods rules applied and in cases where the goods are supplied to consumers in other countries, no UK VAT would be due.

The CJEU decided:

  • The credits are a supply of services:
    • They are the grant of a right to enter the auction.
    • The credits and the goods are not a Single indivisible economic supply.
    • The credits cannot be considered ancillary to the goods.
  • The credits cannot be a payment on account for goods:
    • For auction winners the price of the goods is the winning price, which excludes the cost of the credits.
    • As the payment for credits is consideration for a supply of services, that same consideration cannot also be consideration for another supply as well (the goods).

UK VAT is payable on the credits at the time they are purchased.


Single or multiple supply?

Goods or services for VAT?

Place of supply: goods

Place of supply: services

External link

Marcandi Ltd v HMRC [2018] C-544/16