The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
This guidance note provides an overview of the business promotion schemes that can be used by manufacturer’s to generate sales.
For other types of promotion schemes, see the Business promotion schemes ― overview guidance note.
Manufacturers often have trade promotion schemes in operation in order to encourage customers to purchase more of their premium products. Examples of the typical schemes that could be used by manufactures are provided below.
The manufacturer who is offering vouchers or reward schemes will typically either:
issue a voucher or other proof of purchase when the customer buys the premium goods which can be redeemed by the customer against a future purchase. As the customer can obtain goods without payment when the voucher is redeemed, the redemption goods are treated as a gift and the VAT treatment described in the Business gifts and samples guidance note should be applied
provide a trade reward scheme to customers who purchase a minimum amount in a single trade order. If the customer meets the minimum order requirements, they will receive goods free of charge as part of that order. The cost of the reward goods are deemed to be included in the overall cost of the goods supplied in that order, so VAT only needs to be accounted for on the consideration received (ie no additional VAT needs to be accounted for on the reward goods)
Notice 700/7, para 12.1
Businesses may offer reward goods
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