Commentary

BB/25/96 European Court judgments affect business promotion schemes

Part V16 Forms and other HMRC material

BB/25/96 European Court judgments affect business promotion schemes

BB/25/96 European Court judgments affect business promotion schemes

Business Brief, Issue 25. 6 December 1996

The European Court of Justice (ECJ) released two judgments, Elida Gibbs Ltd and Argos Distributors Ltd, on 24 October 1996 which will affect Customs and Excise policy on business promotion schemes [see Part V11]. This Business Brief outlines the effects of the two cases and how businesses in a similar position can recover overpaid VAT as a result of the rulings.

Elida Gibbs Ltd v C & E Comrs (Case C-317/94) [1996] STC 1387

Elida Gibbs is a manufacturer of toiletries and sells these products to both retailers and wholesalers. In order to promote the retail sales it operates two types of promotion scheme, money-off coupons and cashback.

Elida Gibbs may themselves arrange for the printing and distribution of money-off coupons, or agree with retailers that those retailers will arrange the printing and/or distribution to potential customers. In either case, the consumer can present the coupon to a retailer in part payment for Elida Gibbs's products and the retailer seeks reimbursement directly from Elida Gibbs.

Cashback coupons are printed directly on the packaging of Elida Gibbs's products and offer a cash refund of part of the purchase price paid. Any consumer who can satisfy the conditions printed on the coupon is able to claim the “cashback” payment direct from Elida Gibbs.

Elida Gibbs argued that the reimbursement of a money-off coupon to the retailer and the cashback payment made directly to consumers should be reflected by a reduction in the value

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