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Do you offer retail vouchers under a salary sacrifice scheme?
Employers that offer retail vouchers as part of salary sacrifice schemes may have to pay out any unpaid VAT on the vouchers. This is the possible outcome of a recent opinion issued by the Advocate General of the European Court of Justice on a significant case involving pharmaceutical giant AstraZeneca and the complex area of VAT and the treatment of retail vouchers.

The Advocate General recommends that VAT should be paid to HM Revenue & Customs on vouchers given to employees, as the salary sacrificed by the employees is payment for the vouchers. The European Court will consider the opinion before it gives its final ruling later this year.

Businesses usually recover VAT on the vouchers they buy from an intermediary before passing them on to staff, but they often do not account for VAT when passing the vouchers on to employees. The Advocate General accepted that AstraZeneca could claim for VAT it has paid on buying vouchers, but only if the firm accounts for the VAT when passing the vouchers on to staff.

This means that the potential move could cause confusion and result in many employers who have introduced similar voucher and salary sacrifice arrangements being landed with a substantial tax liability. If your organisation uses salary sacrifice arrangements you are advised to seek advice from your accountant or tax advisor as the implication of this opinion is that potentially all salary sacrifice arrangements, not just voucher schemes, may lead to a VAT liability.
Posted on 19 Nov 2016

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