Treatment of reward payments to crowdfunding investors

The taxpayer raised £670,000 through a crowdfunding website to fund the cost of a robot drilling 20 metres into the surface of the moon. Each investor paid at least £60 in December 2014, in return receiving the promise that they could acquire either physical or digital space in a time capsule to be buried in the moon.

The First-tier Tribunal concluded the certificates were single purpose vouchers within VATA 1994, Sch 10A para 7A and the supply took place when they were issued.

The taxpayer accepted the single purpose vouchers point but said the First-tier Tribunal had made an error of law in failing to apply the time of supply rules in s 6 after it had decide the rewards were single purpose vouchers.

The Upper Tribunal referred to Lebara Ltd v CRC (Case C-520/10) [2012] STC 1536, saying the starting point was to consider whether the crowd-funding exercise involved a supply of services for a consideration for the purposes of the Principal VAT Directive Art 2(c). This created a legal relationship for which there was a reciprocal performance - Lunar agreed to provide rights to digital and/or physical space in the capsule and supporters agreed to contribute funds.

Further, when Lunar issued the vouchers to the supporters, it gave them everything necessary to obtain the supply of the service – the supporter who had made the pledge had all that it needed to obtain the digital or physical space in the capsule. The supply was therefore made at that point under VATA 1994, s 6(3).

The taxpayer’s appeal was dismissed.

Issue: 4718 / Categories: Tax cases