News
Another chance to recover VAT on entertainment costs?
Posted on: 15 February 2010
Last year, businesses had the possibility of making retrospective claims for input tax on the costs of entertaining overseas customers, following rulings in the European Court of Justice (ECJ). Now, an opinion given by the Advocate General in a new ECJ case may open another door, and wider still.
The Advocate General considers that under EU law the recovery of input tax can only be blocked in relation to specifically defined categories of goods or services, and that recovery cannot be blocked in relation to goods or services by reference to the purpose for which the expenditure is incurred. For example, it is in order to block input tax recovery on “the provision of food and drink to the staff of an employer”, but not on “providing the staff of an employer with opportunities for recreation”.
If the Advocate General is correct, the UK’s block on recovery of input tax on any business entertainment costs may be insufficiently precise, in which case businesses may be able to make retrospective repayment claims, currently back to 1 April 2006.
It remains to be seen whether the ECJ will deliver its final ruling in line with the Advocate General’s opinion, but businesses should consider lodging protective repayment claims with HMRC. Any such claims should be prepared and submitted as soon as possible, to avoid the risk of the earliest VAT periods after 1 April 2006 going out of date.
Please contact Stephen James for advice or assistance in relation to such claims.
