Case: loyalty scheme payment was not third-party consideration for VAT

In Marriott Rewards LLC [2017] TC 05634, HMRC successfully rejected a repayment claim for those in business overseas with the First Tier Tribunal (FTT) holding that certain services were not connected with immovable property and were not advertising services, with the services relating to loyalty-reward stays

The Marriott group operates a loyalty-reward scheme where customers obtain points which are redeemable on production of a certificate. There are over 49 million customers worldwide and customers (‘members’) accrue points for stays at hotels (sponsors). Points are redeemed at hotels (‘redeemers’) where they obtain a room for no extra charge.

Marriott Rewards LLC (MR) is incorporated in the US and a subsidiary of Marriot International Inc. Marriot does not generally own hotels. In 2014, 42.4% of hotels were managed on behalf of others and 56.2% were under a franchise agreement. MR did not contract directly with hotels, but rather through other Marriot group companies via participating agreements.

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