The European Court of Justice has ruled that employers must account for output tax on the supply of salary sacrifice retail vouchers to employees.

It is believed that, although many employers recover VAT charged to them when they buy retail vouchers, there are likely to be a number of those that do not account for output tax on the provision of the retail voucher to the employee. Now that the ECJ has followed the Advocate General’s opinion, which was delivered in April, it is likely that HM Revenue & Customs will begin to assess employers for the output tax due.

Steve Hodgetts, VAT partner at Baker Tilly warns “Many employers were shocked at the AG’s opinion delivered in April but have waited until this judgement was released before looking at their own salary sacrifice schemes. Now that this judgement confirms their fears, we recommend that they look at their salary sacrifice arrangements as a matter of urgency. It is likely to cost them a substantial amount of money as HMRC is entitled to assess employers for any output tax due over the last 4 years.”