Posted: Friday 13 August 2010
Benefits & Vat Problems – Some Practical Points
I blogged last week on the somewhat dry subject of VAT, advising that a recent European Court of Justice (ECJ) decision could result in businesses facing unexpected VAT bills in respect of staff benefits.
As I explained last week, the ECJ decision means that vouchers given to staff as part of a remuneration package attract VAT for which businesses will have to account. This is because vouchers that can be spent in shops for goods or services are deemed a “supply of services for consideration”. The obvious question following this was whether any other staff benefits attract VAT in the same way?
Accountants and tax experts have begun analysing the decision. According to Mazars, the “good news” is that benefits such as “pension contributions, additional annual leave and private health care” should not attract VAT. However, other staff benefits could attract VAT, such as computers and mobile phones, according to other reports.
We await some guidance from HMRC on this decision. Until then, I suggest that employers review any staff benefit scheme, particularly those involving vouchers or similar. Expert advice should be taken if you are unsure of the implications of your remuneration packages.
