Business promotion schemes ― loyalty schemes

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

This guidance note provides an overview of the types of loyalty schemes that can be implemented together with the associated VAT issues.

See the Business promotion schemes ― overview guidance note for more information on the other types of business promotion schemes that can be used by businesses.

See De Voil Indirect Tax Service V6.169 and V3.409 for more detailed commentary.

What are loyalty schemes?

A number of organisations participate in loyalty programmes which are designed to improve customer loyalty and increase sales. They also offer businesses with a marketing tool because they can analyse customer information in order to target marketing campaigns, etc. There are a number of different schemes in operation, but the main aim is to link purchases made to a reward or a reduction in the price paid for subsequent purchases by issuing points.

The loyalty scheme can either be a simple scheme where the reward is given by the original supplier when the customer has accumulated sufficient points to cover the purchase or part purchase or a more complex

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