Nick Huber

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AstraZeneca VAT threat to company cars

Nick Huber

28th Sep 2012

4 comments

Nick Huber

Freelance journalist

Have you found this content useful? Use the button above to save it to your profile.

A European court tax ruling may mean that company cars schemes are more expensive to run, Deloitte has said.

Since January, companies have had to pay VAT on non-cash goods and services provided to employees in exchange for some of their salary, HMRC announced.

Employers will still be able to reclaim tax paid to suppliers for the goods and services as input tax.

The change to the VAT treatment of salary sacrifice schemes, which often include such as bikes, childcare vouchers, and high street shopping vouchers, follows a ruling last year by the European Court of Justice (ECJ) over a tax dispute between AstraZeneca UK and HMRC (Case C-40/09).

The case involved retail vouchers provided to employees as part of a remuneration package.

Astra bought retail vouchers at less than their face value and passed them on to employees at that discount - the cost of which was then deducted from their employees’ pre-tax salary.

The dispute with HMRC was triggered after Astra argued that it did not have to charge VAT on the supply of vouchers to the employees.

The ECJ agreed with HMRC, ruling that the salary sacrificed was a supply of services in return for a payment and was therefore subject to VAT. Before the court ruling it was generally assumed that salary sacrifice schemes would not be subject to VAT.

In new guidance on VAT rules for salary sacrifice schemes HMRC says that the ECJ Astra ruling has wider implications for the VAT treatment of salary sacrifice schemes.

Company car schemes may be affected, Nathan Male, director, Deloitte Car Consulting, has said. He told FleetNews: “In essence we believe the position is there is going to be a cost implication for employers operating company car salary sacrifice schemes. We are currently digesting the guidance.”

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By jonbryce

29th Sep 2012 11:09

Margin scheme?

I thought vouchers were vatable on a margin scheme, ie AstraZeneca has to account for VAT on the difference between the purchase and selling price of the Vouchers, and then Argos or whoever accounts for VAT on the face value of the vouchers when they are redeemed.

So if AstraZeneca passed on the vouchers to their employees at cost, there wouldn't be any output VAT even if the supply was a taxable supply?

What am I missing here?

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By nogammonsinanundoubledgame

02nd Oct 2012 13:26

Could be worded better?

"... the salary sacrificed was a supply of services in return for a payment and was therefore subject to VAT."

Could be worded better, perhaps? On a strict reading of this sentence it gives the impression that the supply is being made by the employee to the employer. The employee is presumably not VAT registered and the supply, if VATable, below the compulsory registration threshold. For there to be a VAT charge it would have to be a supply by the employer to the employee, for which the salary sacrificed would the payment in consideration.

With kind regards

Clint Westwood

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By neileg

04th Oct 2012 12:08

However...

Post AstraZeneca, HMRC has made it clear that if the employer operates an input tax restriction either via blocking input tax on purchase or restricting input tax on leasing, then no output tax is accountable.

I realise that there are opinions that disgaree with HMRC stated position, but I'm not aware of any recent changes that would prompt Deloitte to raise the spectre again. Smacks of self promotion to me.

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By djbrown

04th Oct 2012 17:07

Per the article...

The link attached to:

"In new guidance on VAT rules for salary sacrifice schemes HMRC says that the ECJ Astra ruling has wider implications for the VAT treatment of salary sacrifice schemes."

takes us to an HMRC publication dated July 2011. Am I missing something here?

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