Tesco Freetime and another v HMRC

In Tesco Freetime and another v HMRC [2017] UKFTT 614 (4 August 2017) the FTT found that Tesco could recover input tax incurred in operating a loyalty scheme.

Tesco operated a loyalty scheme. A member of the programme (‘a Clubcard member’) who bought goods from Tesco obtained points which were translated into vouchers which could be used against the cost of subsequent purchases from Tesco. Since 1999 a Clubcard member could also use the vouchers to make a purchase from a ‘deal partner’. The issue was whether Tesco could recover as input tax the VAT included on the charges imposed by deal partners.

The FTT rejected HMRC’s argument that purchases from deal partners resulted in ‘untaxed consumption’. The question was not whether there was a VAT-recognised supply of points or whether the customer paid identifiable consideration for the points; the...