The Advocate General has said employers may recover value-added tax (VAT) when it is charged to them on retail vouchers.
The Advocate General’s Opinion, which the European Court will consider before it gives a final ruling later this year, acknowledged that the European Commission may want to consider whether the UK rules are in line with European VAT law.
It was also stated employers should account for VAT when they provide retail vouchers to staff as part of a salary sacrifice scheme.
Giles Salmond, a director in the tax dispute resolution group at Deloitte, 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.
“Although we will have to wait for the final judgment of the European Court 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.”
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