Constable VAT Focus 30 November 2023


VAT gap estimates
The above guidance includes HMRC statistics relating to VAT gap estimates, the difference between the VAT theoretical liability, estimated using national accounts data, and actual cash receipts. HMRC has now published preliminary and secondary estimates of the VAT gap for the tax year 2022 to 2023.

Fulfilment House Due Diligence Scheme registered businesses list
This guidance can be used to check if businesses storing goods in the UK are registered with the Fulfilment House Due Diligence Scheme. The list has been updated with 5 additions and 3 removals.


The Chancellor of the Exchequer delivered the Autumn Statement on 22 November 2023. We have highlighted the VAT related announcements below.

Reforms to Energy-Saving Materials VAT Relief

The government will expand the VAT relief available on the installation of energy-saving materials by extending the relief to additional technologies such as water-source heat pumps and bringing buildings used solely for a relevant charitable purpose within the scope of the relief. These reforms will be implemented in the UK from February 2024. Further details on these reforms will be published shortly.

Women’s Sanitary Products

The government will extend the scope of the current VAT zero rate relief on women’s sanitary products to include reusable period underwear from 1 January 2024.

VAT Retail Export Scheme

The government will continue to accept representations on the VAT Retail Export Scheme and the associated airside scheme (tax-free shopping) and consider this new information carefully, alongside broader data.

VAT Treatment of Private Hire Vehicles

Following the High Court ruling in Uber Britannia Ltd v Sefton MBC, the government will consult in early 2024 on the impacts of the case. The aim of the consultation is to clarify the question of whether the supply to the passenger is made by the driver or by the operator and follows a number of cases concerning non-VAT matters such as the licensing of vehicles and employment status of drivers.



1. Single or multiple supply

This case concerned a dispute between Gap Group Limited (GAP) and HMRC in relation to the VAT treatment of the supply of red diesel fuel made by GAP. GAP is a plant and machinery hire company. The issue for the Tribunal to determine was whether the supplies of plant and machinery (standard rated) and supplies of red diesel (at the time, reduced rated) constitute a single supply required to follow the VAT liability of the supply of plant hire, or multiple supplies, which should be afforded their own VAT treatment.

GAP argued that the plant hire and the supply of fuel are separate supplies for VAT purposes, therefore the supply of red diesel should attract a reduced rate of VAT at 5% applicable to supplies of fuel below the de minimis threshold. HMRC took the view that the supply of plant hire and fuel constitutes a single supply which should be subject to VAT at the standard rate of 20%.

The Tribunal reviewed the party’s submission and relied on case law concerning single and multiple supplies. GAP supplied plant and equipment, if appropriate, with fuel included and the customers had the choice of refuelling using their own, or third party, fuel, in which case there was no supply of fuel at the point the plant was returned. Alternatively, customers may return the plants with fuel missing in which case GAP makes a charge for the fuel used.

It was clear that the supply of plant and fuel are linked, the Tribunal had to determine whether they were so closely linked as to be found a single supply.

The Tribunal noted that the cost of the plant hire and the fuel are separately identified on invoices. The customers had a genuine economic choice as to whether or not to have the fuel provided by GAP, realistic and practical alternatives were available. The Tribunal considered the customer’s aim in paying for the fuel and concluded it cannot be a better enjoyment of the principal supply of hire because that already finished at the point it was determined whether a fuel charge is due or not. The aim was the convenience of not having to refuel. At the outset of the hire, neither GAP nor the customer knew whether there would ultimately be a supply of fuel.

The Tribunal found that fuel was acquired at the moment the customer chose not to refuel. Any customer choosing not to refuel had the unfettered freedom to make that choice and therefore there were separate independent supplies. The appeal was allowed.

Constable Comment: It should be noted that until April 2022 (when the use of red diesel in construction equipment was prohibited) GAP’s supplies of diesel qualified for the reduced rate of VAT, as it was providing less than 2,300 litres of fuel which meant that the fuel was deemed to be provided for ‘domestic use’ (under Note 5 to Group 1, Schedule 7A, VATA 1994).  This is a helpful case highlighting a scenario where distinct supplies are made for VAT purposes even though those supplies are clearly linked. Identifying whether a transaction  is a single composite supply or consists of multiple supplies can be a complex area of VAT and often involves some ambiguity. We therefore always recommend seeking professional advice to ascertain the VAT treatment applicable. Constable VAT would be pleased to assist with any relevant queries. 

2. Non-monetary consideration

In the case of Simple Energy Limited, “Bulb” supplied energy to business and retail customers and operated a ‘refer a friend’ (RAF) scheme. Existing customers (“referrers”) were able to share a personalised electronic link with anyone, and if new customers signed up using that link, both the referrer and new customer would receive a ‘reward’ in the form of a credit against their energy bill. The question for the Tribunal was whether a successful referral under the RAF scheme amounted to the provision of a service to Bulb made by the referrer, such service constituting non-monetary consideration for the supply of energy. If so, VAT would be due on the full amount received, including the value of ‘reward’ credited against the bill.

Bulb argued that the ‘reward’ should be treated as a discount that reduced the value of the energy supplies by Bulb and therefore VAT is due only on the reduced amount paid by the customer. Bulb argued that from the customer’s point of view the credits were clearly a reduction in the price payable rather than consideration for delivering a service. Bulb contended that whether the ‘reward’ was formally described as a discount or not does not affect the position. The ‘service’ of sharing a link was at best de-minimis in terms of effort. In addition, Bulb stated that consideration requires a specific benefit or advantage being delivered to Bulb directly, however, in order to obtain the reward, the referrer only had to share the link with others, but there was nothing provided directly to Bulb at this stage.

The Tribunal relied on a wide range of case law to conclude that the tests for ‘contractual exchange’ required to establish the element of ‘consideration’ were met. There was a direct link between the action of referrers and the RAF credits provided by Bulb. In addition, the Tribunal highlighted that the VAT treatment of the credit received by the referrer could be distinguished from the credit received by the new customer because the referrer received a reduction in their energy costs to reward them for doing something which was additional to what was required of them as customers of Bulb.

The Tribunal therefore concluded that the RAF credits should be considered as non-monetary consideration and VAT is due on the full amount, including the value of the ‘reward’. The appeal was dismissed.

Constable Comment: In this case the Tribunal considered what can amount to non-monetary consideration. The threshold for what the referrer had to do for their reward was low but this did not stop the Tribunal from holding that this amounts to non-monetary consideration. Although a FTT decision is non-binding, it reinforces the complexities of ‘business promotion schemes’ and businesses involved in similar supplies should fully consider these from a VAT perspective. This is an important factor to consider because the implication is that where there is consideration in return for a supply, VAT is due on that consideration, whether it is monetary or not. Where non-monetary considerations are involved there may be further implications with valuation of such consideration. If you or your business requires any assistance, Constable VAT would be pleased to assist.

Please note that this newsletter is intended to provide a general overview of the subject. No liability is accepted for the opinions it contains or for any errors or omissions. Constable VAT cannot accept responsibility for loss incurred by any person, company or entity as a result of acting, or failing to act, on any material in this blog post. Specialist VAT advice should always be sought in relation to your particular circumstance.