VAT on vouchers

The taxpayer company offered its employees the opportunity to surrender some of their salary for retail vouchers. These could be exchanged for goods and services in shops.

Employers have been entering into these schemes because they can get a discount from the shops when buying the vouchers and they share this discount with or pass it on in full to the employees.

However AstraZeneca acting on advice tried to reclaim the VAT it incurred on purchasing the vouchers but without charging VAT when it passed them on to the employees.

HMRC claimed either that they could not reclaim the VAT at all or that if they could they should also have paid output VAT when passing the vouchers on to the employees.

The ECJ characterised the transaction as being a supply by the company to its employees of a future right to...