Barter/ Non Monetary Consideration / Consideration Flashcards
Describe the case of Naturally Yours Cosmetics
Sold cosmetics products at wholesale prices (similar to Avon), to beauty consultants who would resell them at parties, which consultants encouraged the hostesses to arrange.
As a reward, the consultants gave the hostesses a pot of cream which had been purchased from the company for £1.50, instead of the usual wholesale price of £10.14
The CJEU held that VAT was due on £10.14. The consultants were providing a service (arranging for the hostesses to hold the party) in consideration for the cash paid.
The fact that the price was reduced only if the party actually took place, showed that the parties subjectively assigned the value of the service to be that of the price reduction.
Non-monetary consideration has the value of the alternative payment that would normally have been given for the supply
What is the significance of Naturally Yours cosmetics?
If the value of the good is known, the list price is used to value non monetary consideration
Describe the case of Empire Stores Ltd
A company sold goods via mail order (under an introduce-a-friend scheme) and existing customers were entitled to select an item from a list (e.g. a kettle) free of charge once their friend had been approved and placed an order
The CJEU considered the introductory service provided by the customer would be non monetary consideration because there was a direct link between its provision and the reward good.
As the good was not available for sale, only ES knew what the non monetary consideration was. This could only correspond to the amount the supplier paid for the goods.
What is the significance of Empire stores?
If the value of the good is not known, e.g. it is not for retail sale, the cost to provide the good is the non monetary consideration
What is the case of Westmoreland Motorway services?
WMS provided coach drivers with a free meal at is service areas and free cigarettes on the basis that the driver bought 20 or more passengers to the area
HMRC contended that following NYC, VAT was to be charge by reference to the retail price of the meal and cigarettes supplied to drivers
It was held that VAT was due on the value which was the subjective value which the recipient in the supply attributed to it
The facts were not the same as NYC, there was no agreement between the parties and the meal was not for retail sale. The non monetary consideration was the cost of providing the meal per Empire Stores.
What is the case of Vehicle Control Services?
The issue concerned whether VCS was liable to pay VAT on parking penalty charges
If parking penalty charges are consideration for supplies, they are subject to VAT.
The FTT held that VCS did not have the right to sue in trespass as it did not possess the right to occupy the carpark. The parking charges were not damages for a breach in contract, but were paid as a condition of the contract and constituted consideration for services.
On appeal, the taxpayer contended that the charges were outside the scope of VAT as penalties or damages. The court of appeal found that they were not consideration.
What is the significance of the Bristol City Council case?
A contract between the council and motorists entering a pay and display car park was held to have been created, but the excess charges were not consideration for the supply of parking services under the contract.
The excess charges did not arise until the right to park had been lost.
What is the significance of the Vodafone Portugal [2020] case?
The amount payable on early termination payments was calculated in proportion to the completed part of the time period in the contract
The termination payments were held to be a part of the cost of the service so there was a direct link between the services supplied and the amount paid
The payments were consideration for a supply of services so VAT was due, irrespective of whether the amount paid was based on a contractual price
This led to the changing of guidance on termination payments
What is the significance of the Meo [2018] case?
It was held that specific contractual clauses requiring payment on early termination were actual consideration, even where the customer was no longer receiving the supply.
The amount paid related to the remainder of the contract
What is the significance of the Blue Lagoon Beach Hotel & Co case?
Where a company operated a hotel and entered into contracts with travel operators who reserved and paid for the rooms in advance which they could then sell onto their clients, this amounted to a supply for consideration even when the room was not occupied.
The obligation to provide the room was owed by the company to the travel operators rather than to the client
