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Hargreaves Lansdown: tax on loyalty payments

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Case law relating to the VAT treatment of loyalty schemes over the last ten years has caused complications for many businesses with perfectly straightforward commercial promotion and loyalty recognition arrangements. The Upper Tribunal’s decision in HMRC v Hargreaves Lansdown Asset Management has complicated the picture further in the context of loyalty rewards by determining that these may, at least in some circumstances, be annual payments, and therefore subject to withholding tax. The Upper Tribunal’s approach involved disregarding the overall commercial matrix, and the terms on which the arrangements had been marketed by HL, and construing the contracts narrowly. This reinforces the need to carefully review the contractual arrangements for platform incentives and also for loyalty payments and discounts in other contexts.

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