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Marks & Spencer – 'free' wine supplied as part of a promotional offer was subject to VAT

16 July 2019. Published by Nicole Kostic, Senior Associate

In Marks and Spencer plc v HMRC [2019] UKUT 0182 (TCC), the Upper Tribunal (UT) has upheld the First-tier Tribunal's (FTT) decision that wine supplied 'free of charge' as part of a promotional offer was subject to VAT.


The appeal related to a promotional offer by Marks & Spencer plc (M&S) described as: "Dine In for Two - £10 – with Free Wine", which allowed customers to purchase three specified food items for £10 and obtain a 'free' bottle of wine or an alternative beverage. To benefit from this promotion, customers were required to pay for the three food items plus the wine within one single till transaction. 

The issue was whether the £10 should be apportioned between the food items and the wine, as HMRC contended, or whether, as M&S contended, the wine was supplied free of charge for VAT purposes. 

The FTT concluded that the £10 should be apportioned between the food items and the wine. M&S appealed against this decision to the UT. 

UT decision

The appeal was dismissed.

The UT agreed with the FTT and confirmed  that the £10 should be apportioned between the food items and the wine. 

The parties accepted that the supply was effected for consideration only if there was a "direct link between the [goods or] service provided and the consideration received." (C-16/93 Tolsma v Inspecteur der Omzetbelasting Leuwarden). 

In the UT's view, the payment of £10 constituted consideration for both the three food items and also for the wine. The UT was of the view that there was a direct link between the provision of the wine and the payment of £10 as the customer would not receive the 'free' wine unless £10 was paid at the till. 

The UT also agreed with the FTT that the economic and commercial reality was that M&S was offering a package of four items. Stating that the wine was 'free' was no different, in the  promotional sense, to 'buy two get one free' offers. M&S would only provide the wine if the customer bought the three food items for £10. This analysis was not affected by the fact that a customer would have had to pay £10 for the food items even if the wine was not supplied (either through customer choice or lack of availability). In the UT's view, the position was similar to National Car Parks Ltd v HMRC [2019] EWCA Civ 854, where some customers paid £1.50, whereas others paid £2 to park for an hour. The services or goods supplied were the same but the consideration differed according to the particular transaction.


None of the decided cases on 'free' goods or services, nor HMRC's practice in this area, provides coherent or consistent guidance which can be applied to determine the VAT position in any particular case.  

What is clear from this decision is that in circumstances where there is a direct link between the provision of the 'free' item and the payment, it is likely the payment will be apportioned between all of the items, including the notional 'free' item.

The UT's decision can be viewed here