Aimia Loyalty - UK Supreme Court finds that paying for goods to be provided to a third party can generate VAT credits

The UK operator (LMUK) of a loyalty points programme was compensated by participating retailers for points which it awarded on sales to those retailers' customers, and then compensated other retailers ("redeemers") for goods or services which were acquired from them by the customers when redeeming points.

The UK Supreme Court found that the compensation payments made by LMUK to a redeemer were consideration for a supply of services by the redeemer to LMUK itself, rather than representing third-party consideration for a supply of goods or services by the redeemer to the customer who redeemed points - so that  LMUK was entitled to the British equivalent of an input tax credit.

From a GST perspective, the case may be most relevant as an interesting application of the Redrow principle that a "supply of goods or services to the taxpayer...may...consist of the right to have goods delivered or services rendered to a third party."  This judicial approach will sometimes supplement the definition of "recipient" in ETA s. 123(1), which provides that he/she who writes the cheque generally is the recipient of the supply.

Neal Armstrong.  Summary of HMRC v. Aimia Loyalty UK Ltd, [2013] UKSC 15 under ETA s. 169(1).