Loyalty Management UK (Taxation) [2010] EUECJ C-55/09 (07 October 2010)

Loyalty Management UK (Taxation) [2010] EUECJ C-55/09 (07 October 2010)

Payments made by the operator of a loyalty scheme to redeemers who supply rewards to customers are, for VAT purposes, to be regarded as third-party consideration for the supply of goods or services to those customers. In schemes where the sponsor pays the operator who supplies rewards to customers, the payment is to be apportioned: part is third-party consideration for the supply of goods to customers, and part is consideration for services supplied by the operator to the sponsor. It is for the referring court to determine if any payment also includes consideration for a separate service.

Citation
[2010] EUECJ C-55/09
Parties
Appellant/respondent: Commissioners for Her Majesty’s Revenue and Customs; Respondent/appellant: Loyalty Management UK Ltd (LMUK); Respondent/appellant: Baxi Group Ltd (Baxi); Third Party: @1 Ltd
Jurisdiction
European Union
Judgment Date
07 October 2010
Procedural Posture
Preliminary Reference (joined Cases C 53/09 and C 55/09) / Preliminary Ruling by Court of Justice of the European Union
Outcome
Questions answered; interpretation of Sixth Directive provided; apportionment of payments clarified for VAT purposes.
Legal Topics
Value Added Tax (vat), Third Party Consideration, Supply of Goods and Services, Input Tax Deduction, Customer Loyalty Schemes
Tax Law European Union Law Value Added Tax (vat) Third Party Consideration Supply of Goods and Services Input Tax Deduction Customer Loyalty Schemes

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Parties

Commissioners for Her Majesty’s Revenue and Customs

Appellant/respondent

Loyalty Management UK Ltd (LMUK)

Respondent/appellant

Baxi Group Ltd (Baxi)

Respondent/appellant

@1 Ltd

Third Party

Procedural Posture

Preliminary Reference (joined Cases C 53/09 and C 55/09) / Preliminary Ruling by Court of Justice of the European Union

Legal Issues

  1. 1 Whether payments made by operators/sponsors in customer loyalty schemes are consideration for supply of goods/services to customers or for services to the operator/sponsor for VAT purposes under the Sixth Directive.
  2. 2 How to apportion payments between supply of goods to customers and services to operators/sponsors.

Ratio Decidendi

Payments made by the operator of a loyalty scheme to redeemers who supply rewards to customers are, for VAT purposes, to be regarded as third-party consideration for the supply of goods or services to those customers. In schemes where the sponsor pays the operator who supplies rewards to customers, the payment is to be apportioned: part is third-party consideration for the supply of goods to customers, and part is consideration for services supplied by the operator to the sponsor. It is for the referring court to determine if any payment also includes consideration for a separate service.

Court Disposition

Questions answered; interpretation of Sixth Directive provided; apportionment of payments clarified for VAT purposes.

Orders

  • Payments by scheme operators to redeemers are third-party consideration for supply of goods/services to customers; referring court to determine if there is also consideration for a separate service.
  • Payments by sponsors to scheme operators are to be apportioned between consideration for supply of goods to customers and for services to sponsors.