Salary sacrifice deals may face VAT

The handing of a tribunal between Astra Zeneca and HM Revenue & Customs to the European Court of Justice over retail vouchers given as part of employee's remuneration packages could set a precedent for other businesses, says BDO Stoy Hayward. The case was initially heard before a First Tier Tax tribunal which said it could not make a decision until the ECJ clarified whether VAT should be deductible on remuneration packages or not BDO Stoy Hayward's VAT partner Mark Welby said: 'HMRC's challenge raises the question of whether any similar voucher and salary sacrifice arrangements that employers have adopted will now give rise to unforeseen VAT liability'. BDO has estimated that potentially £145m per year could be up for grabs. Welby added: 'Over recent years vouchers and salary sacrifice schemes have become a significant and particularly tax effective part of structuring employee remuneration and the uncertainty created by this case could last for several years. An adverse decision from the ECJ in this case will have major repercussions for many businesses.'
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