Supreme Court — input tax — Loyalty Management win

Before the Supreme Court, Loyalty Management UK Ltd (LMUK) has won its long-running battle to deduct input tax incurred during the ordinary course of its business.

The Supreme Court has largely disregarded a preliminary ruling of the Court of Justice of the European Union (CJEU) by concluding that LMUK, the operator of the Nectar card loyalty scheme (the Scheme), can deduct input tax incurred on payments to participating retailers (the Redeemers) to procure that loyalty card members (Collectors) could obtain goods and services on the redemption of loyalty points for no or reduced cost.

Payment to the Redeemers was not third party consideration.

The principles to determine a claim for input tax recovery set out in Redrow Group plc (Redrow) remain good law, albeit qualified to the extent that the principles must be considered in the context of the economic reality of the transaction…

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