Aimia Wins Nectar Point Tax Ruling at U.K. Supreme Court

An Aimia Inc. unit, which operates the Nectar points loyalty program, won a case at the U.K.’s top court to recover taxes on payments to companies that accept the points as currency.

Failure to set off the payments in its value-added tax bill “would mean double taxation,” said Judge Robert Reed at the U.K. Supreme Court, dismissing an appeal by Britain’s tax-collection agency. “That cannot be right.”

Aimia Coalition Loyalty UK, a unit of Montreal-based Aimia, has fought U.K. tax collectors for a decade over the treatment of its Nectar program, used by companies including supermarket J Sainsbury Plc. Aimia sought to recover VAT from fees to suppliers that took reward points from customers.

The Supreme Court asked for further submissions before making a final order, so Aimia isn’t in a position to comment on the 3-2 ruling of the justices, company spokeswoman Megan Ratcliffe said in an e-mail. Her Majesty’s Revenue & Customs will review the judgment before providing any guidance, the tax agency said in an e-mailed statement.

Nectar points are collected when customers shop at partner companies, and then spent on anything from food to travel. It is the U.K.’s most popular loyalty program, with about 18.5 million members, according to Aimia’s website.

In 2012 financial statements published on its website, Aimia said it made a C$159.5 million ($155 million) provision related to the VAT dispute. It also accounted for C$66.3 million under recoverable amounts.

The VAT case was referred to the European Court of Justice in 2010, which found in favor of HMRC and sent the matter back to the U.K. Supreme Court for a ruling, Aimia said.

The European Court’s ruling was “based upon an incomplete evaluation of the facts,” the U.K. court said in its written decision today.