MHA | Good news for employee incentives & VAT

Good news for employee incentives & VAT

Posted on: January 19th 2023 · read

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A recent legal case has revealed an opportunity to reclaim VAT paid on the provision of retail vouchers and other employee incentives given to employees as part of an employee reward scheme.

HMRC have historically maintained that employee incentives are typically for the private enjoyment of employees. As such, the employer should pay VAT when these are given away.

In the last ever UK case referred to and decided by the European Court, GE Aircraft Engine Services Ltd v HMRC Case C-607/20 succeeded in its argument that the retail vouchers were provided to incentivise employees to improve their performance, and consequently the overall profitability of the business. As such, the Court held that the reward vouchers were granted primarily for a business purpose, with a purely secondary personal advantage for employees.

If you have paid VAT on the free provision of employee incentives, this decision provides an opportunity to claim the VAT back from HMRC. Any reclaim will be capped at four years, so the sooner any claim is filed, the greater the potential recovery.

How can MHA help?

If you would like to learn more about the above, or are interested in reclaiming the VAT paid on previous employee incentives, please contact our team.

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