Clicks Retailers (Pty) Limited v Commissioner for the South African Revenue Service

Clicks Retailers (Pty) Limited operates a retail loyalty programme known as the Clicks ClubCard. Customers who enrol earn loyalty points when making qualifying purchases, which can later be redeemed as vouchers for discounted merchandise at Clicks. In its 2009 tax year, Clicks treated 2% of qualifying purchases as deferred income and claimed an allowance under section 24C of the Income Tax Act 58 of 1962 for future expenditure it would incur when customers redeemed loyalty points. SARS disallowed the deduction on the basis that the income arose from contracts of sale, while the obligation to incur future expenditure arose from the separate ClubCard contract, meaning the ‘same contract’ requirement of section 24C was not met. The Tax Court found in favour of Clicks, but the Supreme Court of Appeal overturned that decision. Clicks appealed to the Constitutional Court.

Leave to appeal was granted, but the appeal was dismissed. Clicks was ordered to pay SARS’s costs, including the costs of two counsel.

The case clarifies the application of section 24C of the Income Tax Act to retail loyalty programmes and develops the Constitutional Court’s jurisprudence in Big G by giving concrete content to the ‘sameness’ test for inextricably linked contracts. It has significant implications for retailers and other businesses seeking to defer tax on income linked to future obligations.