Salary sacrifice scheme providers
fear that an unfavourable ruling by the European Court of Justice
on VAT for retail vouchers could affect company car schemes.
Salary sacrifice schemes have grown
in popularity as employers seek to boost staff morale in a
cost-effective way. The ruling in the AstraZeneca case forbade the
company to claim back VAT on retail vouchers issued to
employees.
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HM Revenue and Customs (HMRC) will
confirm in the autumn whether to review VAT on UK salary sacrifice
schemes.
David Hosking, managing director of
salary sacrifice provider Tusker, said: “We’re watching with
interest. HMRC might argue for backdating VAT charges to companies
over four years, which would have a hugely detrimental effect on
the businesses concerned. However, on the car side of things, there
would need to be a change in the law before that becomes an issue.
The European Court of Justice ruling is not about salary sacrifice
schemes in general. But it’s fair to say that it could have
implications on other salary sacrifice schemes in the future.”
A spokesman for
PricewaterhouseCoopers LLP said: “The UK has specific measures in
place which prevent taxation of salary reductions in respect of
company cars. This will need to be amended if salary sacrifice cars
are to be impacted by
the decision. In addition, the UK input tax blocking provisions,
which restrict input tax deduction on cars, are already a means of
taxing private consumption where those cars are made available for
private use.”
HMRC claimed at the European Court
of Justice that AstraZeneca was not entitled to claim input VAT on
the vouchers it issued staff under the salary sacrifice scheme.
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By GlobalDataA spokesman for HMRC said: “The decision confirms HMRC’s
contention that the provision of a retail voucher by an employer,
which acquired that voucher at a price including VAT, to an
employee in exchange for that employee giving up part of their
remuneration fund, constitutes a supply of services affected for a
consideration for VAT purposes.”
