Revenue and Customs v Loyalty Management UK Ltd: ChD 22 Jun 2006

The taxpayer operated a substantial loyalty reward scheme (Nectar) for assorted companies. The Revenue appealed against an order allowing the company to reclaim input VAT. The court was asked now: ‘what is the proper characteristic, for VAT purposes, of the payment made by LMUK to those other suppliers; is it a payment for a redemption service supplied to LMUK or is it the whole or part of the price paid for the provision by those other Suppliers of the rewards to the customers? Is there, for VAT purposes, a supply of a redemption service to LMUK or of goods or services to the customers?’
Held: Though the matter was incompleteley argued, the Revenue’s appeal succeeded. When goods were provided by a redeemer to a collector, that must be a supply of goods to the collector. That followed from the definition of a supply of goods in article 5(1) of the Sixth Directive (‘the transfer of the right to dispose of tangible property as owner’). The court preferred the argument of the Commissioners because ‘it seems to me the more consistent with the requirements, illustrated in Auto Lease and the coupon cases, that one should stand back and look at the characteristics of the provision and payment in issue in a relatively robust and commonsensical way’. Emphasis was placed upon the fact that the payments made by LMUK were related to the number of points redeemed, and upon the absence of any separately identifiable fee for the services provided to LMUK other than the provision of goods and services to collectors.

Judges:

Mr Justice Lindsay

Citations:

[2006] EWHC 1498 (Ch)

Links:

Bailii

Statutes:

Council Directive 77/388/EEC 17

Jurisdiction:

England and Wales

Citing:

At VDTLoyalty Management UK Ltd v Customs and Excise VDT 6-Apr-2005
VDT VALUE ADDED TAX – input tax – the Appellant operates the Nectar programme under which customers who purchase goods (called primary goods) from certain retailers receive points which they may use to acquire . .
AppliedAuto Lease Holland BV v Bundesamt fur Finanzen ECJ 6-Feb-2003
The court identified the need to give an autonomous meaning to the phrase ‘supply of goods’ in article 5(1) of the Sixth Directive as follows: ‘ . . .. it is clear from the wording of that provision that ‘supply of goods’ does not refer to the . .

Cited by:

At ChDLoyalty Management UK Ltd v HM Revenue and Customs CA 5-Oct-2007
The company (LMUK) managed a loyalty scheme for retailers. Their customers were awarded point sunder the schem on purchasing items, and then redeeemed those points against other purchases. LMUK sought to recover input tax on the invoices it paid to . .
At ChDLoyalty Management UK (Taxation) ECJ 7-Oct-2010
ECJ (prelimiary ruling) Sixth VAT Directive – Taxable amount – Sales promotion scheme – Loyalty rewards scheme allowing customers to earn points from traders and to redeem them for loyalty rewards – Payments made . .
At ChDLoyalty Management UK (Taxation) ECJ 7-Oct-2010
ECJ Sixth VAT Directive – Taxable amount – Sales promotion scheme – Loyalty rewards scheme allowing customers to earn points from traders and to redeem them for loyalty rewards – Payments made by the operator of . .
At ChDRevenue and Customs v Aimia Coalition Loyalty UK Ltd SC 13-Mar-2013
The company managed a card loyalty scheme for retailers. The Revenue appealed against a decision that the company could reclaim VAT input tax on the goods purchased on the customers redeeming their points. The ECJ had decided that the service . .
At ChDRevenue and Customs v Aimia Coalition Loyalty UK Ltd SC 20-Jun-2013
Decisions about the application of the VAT system are highly dependent upon the factual situations involved. The case-law of the Court of Justice indicates that, when determining the relevant supply in which a taxable person engages, regard must be . .
Lists of cited by and citing cases may be incomplete.

VAT, European

Updated: 07 July 2022; Ref: scu.242703