Business promotion schemes ― retail discount schemes

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

This guidance note provides an overview of the VAT consequences of retail discount schemes that can be used by retailers to generate sales to maintain customer loyalty. Businesses involved in other types of promotion schemes should read the Business promotion schemes ― overview guidance note.

Discount schemes

Retailers commonly offer discount schemes and the main schemes are summarised below with the relevant VAT treatment.

Store card discounts

Where a customer has a store card issued by that particular retailer, and makes a qualifying purchase using that card, they receive a credit for a specified sum that is credited to that card. The VAT treatment of the sale of the goods and any discount offered depends on the following:

•
if the retailer and store card company are in the same VAT group ― the group should only account for VAT on the discounted amount
•
if the two companies are not in the same VAT group ― VAT should be accounted for on the full value of the goods supplied, as the discount has

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