TaxCorporate TaxEU judges clear path in voucher VAT minefield

EU judges clear path in voucher VAT minefield

Deloitte flags up opinion issued by Advocate General in the highly complex area of voucher VAT recovery, which says employers can recover the tax when it is charged on retail vouchers

EU judges have paved the way for employers to claw back VAT from vouchers
given to staff in salary sacrifice.

The Advocate General issued an opinion in a significant case involving
pharmaceutical giant AstraZeneca, which deals with the complex area of VAT and
the treatment of retail vouchers.

Employers buy these vouchers from an intermediary before passing them on to
staff.

The Advocate General’s opinion, which the European Court will consider before
it gives a final ruling later this year, has said employers may recover VAT when
it is charged to them on retail vouchers.

But Deloitte warned that the VAT had to be accounted for by passing on the
cost to staff, if businesses wanted to avoid a VAT burden.

The firm believed “many employers recover the VAT charged by the
intermediaries, but are not accounting for VAT when the vouchers are passed to
employees.

“If this is the case and the ECJ follows the Advocate General’s opinion
business may face VAT assessments.”

The Advocate General added that the European Commission may want to consider
whether current UK rules concerning the VAT treatment of vouchers are in line
with European VAT law.

Giles Salmond, a director in the tax dispute resolution group at Deloitte,
who advised AstraZeneca in this litigation, said: “This is an important step in
clarifying how the complex VAT rules on vouchers should be applied.

“If the Advocate General’s opinion is followed, businesses may have to
revisit how they deal with vouchers as part of salary sacrifice schemes.”

Further reading:

Court
ruling puts Royal Mail’s VAT exemption under threat

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