Group benefit

Output tax on discounts negotiated with breweries

The taxpayer negotiated discounts from breweries on behalf of publicans. It retained a portion of the discount paying the balance to the publicans.

The issue was who was making a supply and of what? HMRC’s view was that the taxpayer provided a service of negotiating discounts with breweries based on an aggregation of purchases. Therefore the proportion of the discount it kept was liable to output tax for the services it had performed.

The taxpayer disagreed saying the discount was not a supply but a price adjustment.

The First-tier Tribunal said the taxpayer had supplied an aggregation service to the publicans to achieve increased discounts and this was why the publicans joined it. The economic reality was that the taxpayer had supplied a discount and the consideration was the retained sum which was subject to VAT.

The taxpayer’s appeal was...