Posted: Friday 6 August 2010
Benefits - VAT Problems
Not the most exciting blog ever but a potentially important decision of the European Court of Justice (ECJ) last week means that Employers may be facing unexpected VAT bills.
Astra Zeneca UK Limited, a pharmaceutical company, offered employees retail vouchers as part of its remuneration package. The company’s policy was to buy the vouchers at less than face value from a retailer and then use them to pay its employees (at face value). The company did not charge “output VAT” ie the employees did not pay VAT on the vouchers.
VAT is attracted on a “supply of services for consideration”. Astra Zeneca argued that this did not apply here as the vouchers were given to employees for no consideration. However, the Judges held that, given the vouchers enable employees to purchase goods or services, the provision of the vouchers by Astra Zeneca constituted a “supply of services for consideration”. Consequently VAT was payable.
HMRC may now be entitled to collect “output tax” from employers who have similar schemes to that of Astra Zeneca. This could result in large tax liabilities for some businesses.
As I said, a tad dull, especially for a Friday but it could have important consequences for the way that benefits of this nature are provided.
