A loyal shame

The European Court of Justice (ECJ) recently gave its judgment in respect of the joined cases of Loyalty Management UK Ltd and Baxi Group Ltd.

The first company Loyalty Management which runs the Nectar customer loyalty rewards programme entered into various agreements with retailers customers and suppliers (also known as redeemers).

Under the retailers agreement the retailer issued points to customers and paid to the taxpayer a specified sum in respect of each point issued and a marketing fee. Customers could purchase good from suppliers using their loyalty rewards.

Loyalty Management then paid the suppliers an agreed fee. The company claimed the input VAT on the fee paid to the suppliers. HMRC refused the claim.

The second company Baxi a boiler and heating products provider faced a similar problem in respect of input VAT. It operated a loyalty scheme...