Customer loyalty schemes

The long-awaited European Court of Justice (ECJ) decision in the combined customer loyalty cases of LMUK (C-53/09) and Baxi Group Limited (C-55/09) was issued on 7 October 2010. The two schemes had certain similarities, both aimed at incentivising purchases of their products. The issue concerned whether business promotion rewards were supplies to the vendor of the primary products (the promoter), and thus subject to input tax recovery with no output tax balancing charge, or, alternatively, whether the rewards were supplied to the final consumer, with no input tax for the promoter (or, alternatively, input tax matched against the same level of output tax).