HMRC v Tesco Freetime and another

In HMRC v Tesco Freetime and another [2019] UKUT 18 (24 January 2019) the UT found that VAT incurred on fees paid by a subsidiary of the Tesco group to third party suppliers as part of a loyalty scheme was deductible.

Tesco ran a loyalty scheme. Participating customers who purchased goods from Tesco Stores (the principal retailer of the Tesco group) were provided with points which were translated into vouchers and could be used to obtain discounts on Tesco goods. In addition a feature called the ‘Partner Boost’ enabled participating customers to exchange their vouchers for tokens (‘Reward Tokens’) issued by Tesco Freetime (another company of the Tesco group) which may be used by to acquire goods or services from third parties (‘Deal Partners’). Tesco Freetime paid Deal Partners a sum calculated as a percentage of the face value of...