 More on loyalty schemes
Promoters of, and retailers using, loyalty schemes need to be careful to protect their position pending the European Court of Justice decision in Loyalty Management (UK) Ltd, the case which will determine whether the well-known Nectar card scheme is VAT efficient. HMRC is clearly concerned about how VAT is being accounted for on loyalty schemes as in December 2008 it published a further Revenue and Customs Brief on the subject following an earlier statement in September.
This latest Brief reiterates HMRC’s view that retailers, supplying the redemption goods and services under promotion schemes like the Nectar scheme, should invoice the scheme promoter and charge VAT. This seems to be consistent with the Court of Appeal ruling in the Nectar case but HMRC goes further and says that it also expects VAT to be accounted for on the “gift” to the customer redeeming points. It is very debateable that double VAT liability can exist and any taxpayer involved in promotion schemes should take professional advice on how to protect their position pending a judgment resolving the issue.
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