Tax: Salary Sacrifice Vouchers are Taxable

In Astra Zeneca UK Limited v HMRC the ECJ has confirmed that (most) benefits provided to employees under salary sacrifice schemes are VAT-able. It held that the supply of vouchers or salary sacrifice schemes as part-payment of salary will therefore no longer generate a net VAT repayment.

Astra Zeneca offers its employees the option of receiving part of their salary in vouchers instead of cash. These vouchers are redeemable at various retailers.  It claimed reimbursement from HM Revenue and Customs of the input VAT which it incurred when buying the retail vouchers as the purchase was a business overhead.  HR Revenue and Customs refused the claim asserting that Astra Zeneca had to pay VAT in respect of retail vouchers it purchased if/when they were supplied to its employees as part of their remuneration packages. The ECJ held that the part-payment of salary in vouchers is supply for consideration.  It appears, therefore, that the benefits of providing such a scheme are no longer viable.