25 August 2010 #Employment
Some companies offer their employees benefits and incentives as part of their remuneration package, such as salary sacrifice schemes by way of vouchers to be used in retail stores. Companies will then claim back from HMRC the VAT which is incurred when buying the vouchers.
However, in the recent case of Astra Zeneca UK -v- HMRC, the employer was not able to claim back the VAT on the vouchers.
The European Court of Justice held the provision of a retail voucher as part of remuneration ‘constitutes a supply of services effected for consideration.` Essentially the employee had forgone part of their salary in return for vouchers, the salary of which is deemed to be income of the employer. VAT therefore had to be paid.
Although this decision applies to retail vouchers, this could well apply to other packages/ benefits that the employer offers such as cycle to work schemes and cars.