EMI VAT win opens up promo goods refunds for all businesses

EMI artist Corinne Bailey Rae

EMI's VAT win in the European Court of Justice could open up repayments to any type of business that provides promotional goods.

At the moment UK law requires VAT to be charged on all but one sample given to the same person. In the music industry it is common for many sample CDs to go through distribution channels, who then send them on to their contacts in the music industry to promote the new work.

In light of the ECJ judgment, the UK and several other EU member states will likely be forced to change their rules on the VAT treatment of samples and business gifts.

"This is a significant decision from the ECJ and will impact many businesses both in the UK and across the EU which distribute samples or gifts of small value," said Giles Salmond, a director in the tax dispute resolution group at Deloitte.

Jonathan Legg, tax partner at Mishcon de Reya, said: "Companies in a similar position to EMI should therefore consider putting in VAT reclaims now for overpaid VAT on the provision of samples – it is possible to go back and make reclaims for the past four years."

A spokesman for HMRC said that the ruling would not necessarily open up all samples and gifts to a VAT rebate.

"This judgment does not mean that all the UK’s legislation on samples and business gifts is wrong. In principle they are relieved from VAT, and the ECJ has not ruled against restricting the scope of that relief where appropriate. We will need to carefully consider the judgment and determine the extent to which UK legislation may require amending," said the spokesman.

Further reading:

EMI wins six-year VAT battle over promo records