Friday Law Report: Supermarket Clubcard Scheme Vouchers Were Not Issued for a `Consideration' ; 17 October 2003 Tesco PLC V Customs and Excise Commissioners ([2003] EWCA Civ 1367) Court of Appeal, Civil Division (Lord Justice Schiemann, Lord Justice Latham and Lord Justice Jonathan Parker) 14 October 2003

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VOUCHERS ISSUED under a supermarket clubcard scheme did not fall within paragraph 5 of Schedule 6 to the Value Added Tax Act 1994, since they were not issued for "consideration" in the Community law sense of the term.

The Court of Appeal dismissed the appeal of Tesco plc against a decision that vouchers which it issued to customers under a clubcard scheme were not issued for a "consideration".

The taxpayer operated a clubcard scheme by which customers who joined the scheme acquired points on purchase of goods ("premium goods") from the taxpayer. From time to time, the taxpayer issued vouchers by reference to the number of points accumulated by the customer during the period in question. The vouchers had a face value expressed in units of 50p and would be accepted by the taxpayer ("redeemed") at face value on later purchases of goods ("redemption goods") by the customer.

The taxpayer argued, first, that the vouchers were issued for "consideration" according to Community law and that, therefore, by virtue of paragraph 5 of Schedule 6 to the Value Added Tax Act 1994, the face value of the vouchers as and when they were issued fell to be deducted by the taxpayer from the shelf-price of the premium goods when accounting for VAT on the supply of the premium goods.

Secondly, it contended that, as and when vouchers were redeemed, the face value of such vouchers was to be treated for VAT purposes as consideration for the supply of redemption goods, so that for VAT purposes the total consideration obtained by the taxpayer for the redemption goods consisted of the face value of the vouchers accepted in respect of those goods, plus any cash payment made by the customer on the purchase of those goods.

The commissioners argued that the vouchers were not issued for "consideration" in the Community law sense. …