LMUK welcomes court of appeal victory over VAT
Loyalty Management UK, the operator of the Nectar coalition loyalty programme, has won a significant judgement in the Court of Appeal, against the government's VAT department, HM Revenue and Customs (HMRC).
The dispute with HMRC was over VAT input tax recovery (the claiming back of VAT paid during the course of business operations).
The point of the dispute Despite an appeal by HMRC, the Court of Appeal agreed with an earlier court decision that businesses that provide rewards in exchange for loyalty points are actually supplying services for VAT purposes.
As a result, the court held that Loyalty Management had incurred VAT input tax on the supplies for loyalty redemptions, and was therefore entitled to claim that VAT back.
Positive response When asked for the company's response to its victory in the Court of Appeal, a spokesperson for LMUK told The Wise Marketer: "We are of course pleased to have won our appeal regarding LMUK's VAT position to the Court of Appeal at this stage of the legal process. This is not necessarily the end of the matter, as there could be further legal proceedings. In any event, we had not been assuming a win in our financial models. If there are no further legal proceedings or we win any there might be, the VAT treatment will mean a one-off adjustment to our reserves and a modest uplift in ongoing profitability, but does not have any bearing on the underlying performance of the business."