The European Court of Justice has ruled that employers must account for output tax on salary sacrifice retail vouchers to employers.
Global pharmaceutical company, Astra Zeneca, has lost its case on the VAT treatment of retailer vouchers provided to employees as part of their remuneration package.
Although many employers recover VAT charged to them when they buy retail vouchers, there are likely to be a number who do not account for output tax on providing the vouchers to employees. Further to the ECJ’s ruling, experts say it’s likely that HMRC will start assessing employers for the output tax due.
It's estimated that the decision could cost employers half a billion pounds in unpaid VAT backdated over the last four years and over £100 million going forward.