Loyalty schemes post LMUK & Baxi

The ECJ has issued its judgment in Loyalty Management UK & Baxi Group. These cases considered the VAT status of payments for redemption goods and services under their respective loyalty schemes. The payments were, in the main, found to be third party consideration for the reward goods or services, therefore LMUK and Baxi could not fully deduct the VAT charged to them. Any business involved in a loyalty scheme would be wise to review its VAT position to limit the amount of irrecoverable VAT, or to reduce the amount of output VAT it should pay.