VAT information sheet 03/14: treatment of refunds made by manufacturers

This information sheet explains the VAT treatment of certain “refunds" made by manufacturers.



The European Court of Justice in the case of Elida Gibbs (C-317/94) held that a manufacturer was entitled to adjust its VAT to take account of reimbursements paid directly to final consumers under a promotion scheme. In that case, the consumer would send a coupon to the manufacturer and claim a cash refund of part of the price paid by him or her to the retailer.

The government has therefore introduced a new Regulation 38ZA which expressly provides for adjustments in both Elida Gibbs reimbursement and dissatisfied customer refund scenarios.

The new regulation takes effect from 1 April 2014 and covers any refund (as defined in that regulation) made in a VAT period that ends on or after that date.

Published 2 April 2014