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Retail Vouchers are Liable for VAT, Following ECJ Ruling

A ruling by the European Court of Justice caught my eye recently, as I believe it will have far reaching effects for many different businesses that offer retail vouchers to their staff members in lieu of salary payments.

Apparently many companies often give out retail vouchers instead of certain payments that would otherwise be given as salary.  It has now been recommended that these vouchers should be liable for VAT, but many companies have not accounted for this.  It is very likely they will have neglected to put aside any money to cover any such payments as it was not thought it was needed.

It also seems as if any due payments will be backdated.  One report pointed to a massive £500 million pounds in backdated VAT payments that would go back for the past four years.  Every affected business would have a different amount of VAT to pay of course, but they are all likely to feel the squeeze as a result.

I will be watching closely to see how HMRC handles this from now on.  Experts have also queried whether this ruling could lead to more decisions being made on other items that could be eligible for VAT payments.  Some salary packages also have other items such as cars included in them, and these could also eventually be deemed to be liable for the VAT payment.

It will be interesting to see where things progress to after this ruling, and perhaps worrying too for some businesses.  If you have any concerns about your own business in this respect, you may get in touch with us at St Matthew for expert advice.


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