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On appeal from: [2007] EWCA Civ 938

By a majority of 3-2, the Supreme Court held that VAT is deductable as input tax on payments made by LMUK to suppliers in consideration for allowing people to redeem Nectar points for goods and services. The CJEU guidance was that the right to deduct VAT is an integral part of the EU system of VAT; it was intended to relieve a trader entirely of the burden of the VAT payable or paid in the course of all his economic activities. The economic reality is that the suppliers make taxable supplies to LMUK. The payments made represent the value to LMUK of the services provided. LMUK should therefore be entitled to deduct from the VAT for which it is accountable, that VAT charged by the suppliers, so that it only pays VAT on the added value for which it is responsible.

For judgment, please download: [2013] UKSC 15
For Court’s press summary, please download: Court’s Press Summary
For a non-PDF version of the judgment, please visit: BAILII