Busy Time for Tax Solicitors After ECJ Ruling

Thu, 05 Aug 2010

The European Court of Justice (ECJ) has made a landmark ruling which could see companies forced to pay VAT on any shopping vouchers it passes on to its employees in lieu of salary. The case involving pharmaceutical manufacturer AstraZeneca is sure to have significant legal ramifications, with HM Revenue and Customs (HMRC) now likely to order their lawyers and solicitors to make a raft of claims against companies who provide similar schemes.

With the government eager to maximise its revenues in an effort to rebuild the nation’s economy, tax experts have estimates that the ruling could cost UK companies £100 million a year, while back payments dating back to 2006 could total as much as £500 million.

Victoria Goode, partner at City law firm Lewis Silkin, commented that companies who have bought large quantities of retail vouchers were most likely to be affected. These companies typically reclaim the VAT spent when buying the vouchers, but fail to recharge the tax when distributing the vouchers among employees. Those companies who have previously sought guidance and told that they did not need to repay the VAT will not be liable for the back payments, however.
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