TaxCorporate TaxAdvisers issue warnings after AstraZeneca VAT voucher case

Advisers issue warnings after AstraZeneca VAT voucher case

Advisers ring alarm bells after European judges rule FTSE 100 giant must account for VAT on employee vouchers

Advisers have warned that companies could be open to probes from the taxman
after European judges ruled AstraZeneca must account for VAT when passing on
shopping vouchers to staff in salary sacrifice schemes.

The FTSE100 giant had previously bought the vouchers with VAT included and
then recovered the tax before handing them over to staff.

However, the European Court of Justice said giving staff vouchers which could
be used to buy goods and services represented a “supply”, and that VAT is due on
the amount of salary sacrificed.

Marc Welby, VAT partner at BDO, believed the decision could cost employers
over £100m per year, with an additional £500m due if HMRC look to collect VAT
from the last four years.

Because of the ruling, companies may find themselves exposed to “significant
” VAT probes from the taxman if they do not account for the VAT when they
transfer them to staff members.

Giles Salmond, a director in the Deloitte tax dispute resolution group, and
adviser to AstraZeneca during the ECJ case, said:

“Large employers which use retail vouchers as part of any salary sacrifice
arrangement for staff may now have to revisit how they deal with the VAT
accounting on these vouchers.”

The ECJ believes it should result in a nil VAT burden for employers, where
they simply pass on to staff the cost of the vouchers including VAT, but
advisers do not agree.

Welby commented that “This decision of the European Court will result in many
employers who have introduced salary sacrifice arrangements – and not just
voucher arrangements – being landed with a substantial additional VAT liability.

It will also cause confusion as the salary sacrificed is not treated as a
payment for direct tax and national insurance purposes, he added.

Ellie Gamble, senior manager of Employer Solutions at Grant Thornton, said
almost 50% of the UK’s employers offer their staff some kind of flexible
benefits package with discounted retail vouchers being a popular option.

“For employers using salary sacrifice arrangements for vouchers, this
judgement could potentially cost significant sums.”

Further reading:

EU
judges clear path in voucher VAT minefield

Related Articles

‘Google tax’ nets HMRC £281m

Corporate Tax ‘Google tax’ nets HMRC £281m

3m Emma Smith, Managing Editor
OTS report: Corporation tax should follow accounts

Corporate Tax OTS report: Corporation tax should follow accounts

5m Alia Shoaib, Reporter
HMRC tax evasion assistance requests double in five years

Corporate Tax HMRC tax evasion assistance requests double in five years

5m Emma Smith, Managing Editor
Spring Budget 2017: Making Tax Digital

Business Regulation Spring Budget 2017: Making Tax Digital

9m Shereen Ali, Deputy Editor
Tax fraud loses HMRC £16bn

Corporate Tax Tax fraud loses HMRC £16bn

10m Emma Smith, Managing Editor
HMRC nets £2.6bn in corporate tax from big businesses

Corporate Tax HMRC nets £2.6bn in corporate tax from big businesses

10m Accountancy Age editorial
Tax crackdown brings in £468m for HMRC

Corporate Tax Tax crackdown brings in £468m for HMRC

11m Accountancy Age editorial
Treasury Select Committee report released on Making Tax Digital

Accounting Standards Treasury Select Committee report released on Making Tax Digital

11m Stephanie Wix, Writer