VAT – Potential Windfall re Business Entertaining Expenses
A VAT windfall could materialise for UK businesses if two European cases are ruled in favour of the taxpayer in relation to input tax claims on business entertainment expenses. The current position in the UK is that input VAT on staff entertaining e.g. Xmas lunch is recoverable and input VAT on business entertaining e.g. taking client or customer to a sporting event is not recoverable. The two European cases in question (X Holding BV and Oracle Nederland BV – C-538/08 and C-33/09) have been held jointly at the ECJ. Prior to the ECJ releasing its decision the Advocate General (‘AG’) releases his opinion. In summary, the AG has already opined that the national input VAT ‘blocking’ provisions must clearly define the nature of the goods and services that are blocked i.e. those items where input VAT is not recoverable. This gives an indication that the taxpayers may be successful in this instance. The ECJ can take 6 or 9 months to release its decision and businesses should consider if they wish to submit a ‘protective’ claim to HMRC (in the UK). Businesses may consider submitting such a claim as there is a time limit during which retrospective claims can made. Claims can be submitted during this month of March 2010 for all periods on or after 1 April 2006. However, as we progress through 2010 any claim can only go back 4 years i.e. some time periods after 1 April 2006 will be excluded from any claim.
If your company undertakes a large amount of business entertaining it is recommended that you consider submitting a ‘protective’ claim. Should your level of business entertaining be quite small it would probably be prudent to wait until the ECJ releases its decision. Should you wish to discuss this further please call your usual contact at Wylie & Bisset on 0141 566 7000 or email info@wyliebisset.com
