The Supreme Court has decided (by a majority of three to two) in HMRC v Aimia Coalition Loyalty UK Limited [2013] UKSC 15, that Aimia Coalition Loyalty UK Limited (Aimia), the company that runs the Nectar points scheme, is entitled to reclaim VAT on the cost of redemption of goods and services delivered to Nectar cardholders.

Following a reference to the CJEU by the House of Lords in 2008, the CJEU decided that payments made by Aimia to the businesses supplying the redemption goods and services were ‘third party consideration’ for supplies made to the cardholders.

However, the Supreme Court has now concluded that the CJEU decision did not take account of the full circumstances of the case and that, when the full facts (as found by the VAT and Duties Tribunal in its decision) are taken into account, there is a supply to Aimia on which input VAT is deductible. The Supreme Court’s decision emphasises that consideration of the “economic reality” of the situation is all important, and so conclusions will be very dependent on the facts of particular cases.