Chapter 8 Goods and services as prizes

In this Chapter, I will investigate the VAT treatment of giving away goods and services as prizes, for example to winners of a lottery. At first sight, these types of transactions could be construed as ‘conditional supplies free of charge’ but also as species of ‘barter transactions’. That is why I examine these types of transactions after researching those topics (Bartering in Chapter 7 and The VAT treatment of supplies for no consideration in Chapter 6), just before the last chapter where all findings and views culminate, keeping in mind that vouchers can also serve as prizes. One of the most famous childrens’ books in the world is about a voucher that was given away as a prize, and where that voucher entiled the holder to a supply of a (composite) service: Roald Dahl’s ‘Charlie and the Chocolate Factory’.1 In the book, a limited number of vouchers, called ‘Goldel Tickets’, were hidden inside the packaging of confetionary products made by a chocolate manufacturer: Mr. Wonka’s Chocolate Factory. The winners of this contest, or the people that found the Golden Tickets, were allowed a tour of the factory and to bring a guest. A great example of a promotional activity involving vouchers, as well as a great source of entertainment.

In the previous Chapters, I have discussed the direct link between a payment or consideration and a supply and how to determine the taxable amount for a supply, whether this is a supply made free of charge, as part of a barter transaction, as part of a multiple-element transaction or just for consideration. A number of relevant questions that are specific to giving away good or services as prizes, need to be answered in this chapter:

Another relevant question is how to determine whether a lottery is actually organised for free, especially if ‘contestants’ have to complete a puzzle or perform something else. As I explain in Chapter 7, in my view the feats performed by these contestants should generally be considered as conditions for entering the contest (e.g. the lottery) rather than a consideration in kind paid in return for entering the competition (i.e. the lottery).