Allow the VAT!

Loyalty Management UK Ltd which runs the Nectar customer loyalty rewards programme entered into various agreements with retailers customers and suppliers. Under the retailers agreement the retailer helped in the issue of points with customers and paid to the taxpayer a specified sum in respect of each point issued and a marketing fee. The agreement with customers was that they received points when they purchased 'primary' goods from the stated retailers and they could use those points to acquire 'secondary' points from other suppliers. It was agreed with the suppliers that if they provided goods to customers in return for points the taxpayer would pay them a reward fee i.e. an agreed value for the points.

The taxpayer claimed the VAT on the reward fee. HMRC did not allow the claim. The VAT tribunal allowed the taxpayer's appeal but the High...