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
“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
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.
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