Win for Nectar in landmark VAT appeal ruling

Loyalty Management
(LMG), the company which operates the Nectar loyalty points scheme,
has won a landmark judgment against HM Revenue and Customs (HMRC) in a VAT case
at the Court of Appeal.

The Court of Appeal upheld a court decision that businesses offering reward
goods to customers in exchange for redeemed Nectar points were making supplies
of services to LMG for VAT purposes. LMG had, therefore, incurred VAT input tax
on the supplies, and could recover it – the point contested by HMRC.

Daniel Lyons,
indirect tax partner, said a defeat for LMG could have threatened the existence
of Nectar and other loyalty schemes.

“Given the frequency of these arrangements in the retail sector, the amounts
of VAT in question are potentially very large indeed,” he said.

Further reading:

Mobile VAT victory a blow for taxman

Tribunal disclosures ruling boost for tax advisers

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