6.2.5 When is a supply made ‘free of charge’ or not made ‘for consideration’?

The concept of ‘gift’ itself is not unambiguous. In the dictionary, a ‘gift’ is defined as ‘a thing given willingly to someone without payment; a present’.1 This definition implies that a gift does not require a reciprocal action. In some legal systems, a gift requires the recipient to actively accept it as such,2,3 but accepting a gift is not a ‘reciprocal action’ from an EU VAT perspective.

In marketing psychology, the act of giving is driven by the fact that most recipients, accepting the gift, will feel more inclined to accept sales offers from the person (or business) that gave them a gift.4^,5 Something similar applies in economics. From an economic and commercial reality point of view, it could be argued that there is no such thing as a free lunch,6 implying that no business will ever give something away without expecting something in return.

What does this mean? Is a gift really free or, in ‘VAT speak’7, ‘not for consideration’, or can some business gifts actually be considered to be supplied for consideration because a reciprocal supply is expected or certain? Is, for example, the music played in the streets by a busker a ‘gift to the public’ or a supply of a service for consideration? After all, some form of revenue is to be expected, otherwise the busker would not be in this ‘business’. And if a business hands out a large number of free pens with its contact details on it, it can be expected that at least one of the users of those pens will actually contact the business for a (subsequent) paid transaction? Are these supplies made ‘for free’ or ‘for (some form of) consideration’? As I demonstrated in Chapter 3, for VAT purposes, this depends on the ‘degree of directness’ of the link between the supply and the (reciprocal) action.