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The advocate general of the European Court of Justice (ECJ) has given his opinion in the Astra Zeneca case on the VAT treatment of retailer vouchers provided by the company to its employees as part of their remuneration package.
He said VAT should be paid to HMRC on the vouchers, although he accepted that Astra Zeneca could recover VAT paid on the purchase of the vouchers when it accounted for VAT on the provision of those vouchers to employees.
This opinion, if followed by the ECJ, could ‘result in many employers who have introduced similar voucher and salary sacrifice arrangements being landed with a substantial additional tax liability’, said Marc Welby, VAT partner at BDO.
He added that ‘it will also cause confusion as the salary sacrificed is not treated as a payment for direct tax and National Insurance purposes’.
‘This is an important step in clarifying how the complex VAT rules on vouchers should be applied,' said Deloitte director Giles Salmon.
‘If the advocate general’s opinion is followed, businesses may have to revisit how they deal with vouchers as part of salary sacrifice schemes.
'Although we will have to wait for the final judgment of the ECJ before the position is certain, it is likely that the VAT treatment of vouchers will have to be considered by legislators possibly at a community level,' said Mr Salmon.
