| HM Revenue & Customs
(HMRC) has shifted its position on the VAT
treatment of business entertainment
provided to overseas customers. The UK
blocked the recovery of input tax (the VAT
paid to suppliers) on business
entertainment when VAT was introduced in
1973, except where the business
entertainment was provided to an overseas
customer.
In 1988, UK law was amended to extend
the block to include business
entertainment provided to overseas
customers.
Now, following the European Courts of
Justice (ECJ) judgment in the joined case
of Danfoss and AstraZeneca, HMRC has
decided that the UK block on the recovery
of input tax on the business entertainment
of overseas clients is inconsistent with
EU law.
HMRC says the government intends to
amend UK law shortly and in the meantime
it will consider claims for previously
restricted VAT in respect of the
entertainment of overseas customers,
subject to the normal four year cap.
The block on recovering input tax on
entertainment provided to anyone other
than an overseas customer, for example,
non-UK business contacts who are not
customers, remains in place.
LINK:
HMRC guidance |
