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In October 2007 HMRC lost the Loyalty Management (UK) Ltd case concerning the VAT treatment of payments for Nectar scheme rewards, in the Court of Appeal.
The court decided that the payments made by Loyalty Management to Nectar scheme 'redeemers', known as 'service charges', were for taxable supplies of ‘redemption services’ by the redeemer to Loyalty Management.
The taxpayer company is entitled to claim input tax on the amounts it has paid to redeemers, so long as that decision remains in effect.
The Revenue has been granted leave to appeal to the House of Lords, which has referred the matter, as well as the appeal in Baxi Group Ltd, to the European Court of Justice without full hearing.
HMRC’s position, pending the resolution of the litigation, was set out in Revenue & Customs Brief 46/08 issued on 17 September 2008.
This brief clarifies that redeemers in the Nectar scheme who are not correctly treating the supplies in accordance with the guidance set out in the above brief must do so from 17 September 2008.
HMRC have published another brief - number 60/08, dated 17 December 2008 - which clarifies that redeemers in the Nectar scheme who are not correctly treating the supplies in accordance with the guidance set out in the above brief must do so from 17 September 2008.
Any other guidance is withdrawn from the date of the brief.
