Elida Gibbs Ltd v C & E Commissioners

CJEC Case C-317/94; [1996] STC 1387; [1996] 1 ECR 5339; [1997] 2 WLR 477; [1997] All ER (EC) 53

Elida Gibbs (EG), a manufacturer of retail goods operated a promotional scheme. In the scheme it offer vouchers to the customer, who could then obtain a refund from the retailer. EG accounted for output tax net of the refund, i.e. it reduced its output tax. The Commissioners argued that as the refund was to a third party, the customer, it could not reduce its output tax calculation to the retailer. The ECJ found in favour of EG, asserting the fundamental principle of VAT, the VAT system should collect a share of what the end users or customers actually paid for a supply. The only way that this could be achieved was by EG reducing its output tax liability.