VATable fee

The taxpayer was an e-retailer that charged customers £19.95 a month for the right to purchase goods at a discount.  HMRC said the fee was subject to VAT at the standard rate.

The taxpayer appealed claiming the monthly charge it was in effect part of the consideration for a supply of goods: if no purchase was made in a month the fee remained chargeable but the customer received an exempt account management service.

The First-tier Tribunal found that the £19.95 was not part payment for goods. It was the same regardless of whether or not the customer bought any items in a month. It was consideration for the right to buy goods at a reduced price.

The taxpayer’s appeal was dismissed.

Independent VAT consultant Neil Warren said “The key point is that the nature of a supply is what counts in determining the VAT...