Readers’ forum: Reducing output tax on member reward credits

VAT and loyalty reward

One of my clients offers flexible workspace accommodation to local businesses on a subscription basis. The members get access to a table and desk on a 24/7 basis wifi connection tea and coffee even free biscuits. The subscription fees are standard rated.

In order to encourage new members my client wants to reward existing members who refer new clients. If a new client subscribes for a year the referrers will be given a ‘cash payment’ equal to 10% of the annual fee paid by the new member.

My client is keen to make an actual payment to the referrers – more transparent – rather than discount their next subscription but I think this might be an own goal as far as VAT is concerned.

My view is that the referrers are then making a marketing supply which would be a...