Case: Loyalty scheme points redemption payments

[2018] UKUT 0129

Mr Justice Henry Carr, Deputy Judge Julian Ghosh, QC

Decision released 30 April 2018

Value added tax – ‘Points’ based rewards scheme – Whether payments made to redeemers third-party consideration for supply of rewards – No – Whether redeemers made separate supplies to operator of scheme – Yes – Whether those separate supplies relate to immovable property or constitute advertising services – No – Appeals dismissed.

Marriott Rewards LLC & Anor v Revenue and Customs Commissioners [2018] BVC 509


MR a US company operated a worldwide customer loyalty reward scheme. Whitbread owned hotels operated under an international franchise agreement with Marriott. Marriott customers (Members) earned points at sponsoring hotels redeemable for stays at hotels (Redeemers) on presentation of a certificate from MR.

MR appealed against HMRC’s refusal to repay VAT against payments to Redeemers under VATA 1994, s. 39 allowing persons belonging outside the EU to claim a refund of VAT paid in the UK for periods after January 2010. MR considered this payment to be consideration for services of immovable property and/or hotel accommodation, Directive 2006/112 (the Principal VAT Directive), art. 47.

Whitbread appealed against HMRC’s refusal to repay overpaid VAT output tax under VATA, 1994, s. 80 on the grounds that its services as a Redeemer to MR were of advertising and the place of supply prior to 1 January, 2010 was in the United States (US) where MR belonged, Directive 77/388 (the Sixth Directive), art. 9(2)(e).

HMRC claimed that payments by MR to Redeemers, including Whitbread, were third-party consideration for hotel rooms offered to Members. If MR and Whitbread were successful on that point then the second issue was establishing the nature of the supply. Regarding MR HMRC argued that services after January 2010 were a kind of redemption service with a place of supply in the US and no UK VAT due so there was no repayment claim. Regarding Whitbread HMRC argued that such supplies were properly chargeable to UK VAT allowing MR to make a refund claim under the 13th Directive.

The parties agreed that if HMRC succeeded on third-party consideration then the whole appeal failed, this would be issue 1, otherwise the matter would proceed to issue 2.

For issue 1 MR’s case, adopted by Whitbread, was that this case was indistinguishable from R & C Commrs v Aimia Coalition Loyalty UK Ltd (formerly Loyalty Management UK Ltd) [2013] BVC 67 where the Supreme Court ruled that payments made by the promoters of the Nectar reward scheme were consideration for services received from Redeemers. HMRC disagreed, the SC had highlighted certain elements in LMUK that were not present in the MR scheme. The UT disagreed with HMRC over sticking tax if it found against HMRC on this issue, indeed it observed that should HMRC succeed on issue 1 then it would most likely result in more VAT being paid than was due. The UT referred to the MR scheme as a complex separate operator model, against other loyalty card schemes. The UT concluded that payments from MR to Redeemers were consideration for a supply by the Redeemer of accepting points. Having set out the main principles of VAT the UT identified the transactions as part of MR’s economic activities with clear reciprocity in that Redeemers accepted the members points certificate in return for payment from MR, see para. 54 of the decision.

Having dismissed HMRC’s third-party consideration point the UT moved on to issue 2. The UT rejected MR’s argument agreeing with the FTT’s explanation that services by Redeemers were the generic service of agreeing to provide reward stays generally and not a specific hotel room. The test laid down for a supply of immovable property is that it must relate to a specific property, see Minister Finansów v RR Donnelley Global Turnkey Solutions Poland sp zoo (Case C-155/12) [2013] BVC 342, see para. 57.

The UT also rejected Whitbread’s case that it supplied advertising services, although it agreed that the loyalty scheme as a whole advertised the Marriot brand and that giving away goods can be a form of advertising. However, the UT decided that as the FTT had reached a decision on the evidence, had not misdirected itself, and had considered guidance in EC Commission v France (Case C-68/92) [1993] ECR I-5881, there was no reason to disturb its findings see para. 65.

The UT therefore dismissed the appeals.


The UT confirmed the potential complexity of rewards schemes, especially where parties reside in different jurisdictions. In this case the UT followed LMUK in dismissing HMRC’s third-party consideration argument. The place of supply rules can be complex especially where the nature of a supply is unclear. In the case of Whitbread the issues pre-date the current rules stemming from January 2010.

For commentary on place of supply, see the Indirect Tax Reporter at ¶13-466.

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