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VAT on business entertainment

Once again a recent EU VAT case has cast some doubt over the UK’s treatment of VAT on business entertainment costs.

The Advocate General’s Opinion ('AG') in the joint case of X Holdings BV/Oracle BV (C-538/08/C- 33/09) has indicated that the Dutch VAT legislation may not have correctly implemented EU VAT legislation. As UK and Dutch VAT law are similarly drafted on this issue, there may be scope to reclaim UK VAT previously disallowed, if the AG opinion is followed in the final ECJ judgment. This is typically the case.

The AG found that the Dutch law was not sufficiently precise as to what constituted 'business entertainment'.

We await the final decision with much interest. Even if UK law is then cast into doubt, it is likely to meet with much resistance from the UK authorities, due to the potential for retrospective claims going back four years.

Businesses should consider whether to make a protective claim to HMRC, particularly if substantial VAT amounts have been disallowed during this period.

Jane Stacey is a VAT adviser and a senior manager at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Jane you can call her on 01727 869141.




Date: 16th April, 2010
Author: Jane Stacey


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