Firms that offer vouchers to employees in exchange for salary sacrifices may face a VAT charge, following a recent opinion of the Advocate General of the European Court of Justice (ECJ).

It involved AstraZeneca, which had given employees vouchers in exchange for salary sacrifices. The VAT element of the vouchers had been recovered as input VAT, but no payment of output VAT was made when the vouchers were supplied to staff.

The Advocate General decided that the vouchers represented a taxable supply (i.e. the payment for them was the sacrificed salary). This meant that AstraZeneca was liable to pay output VAT on the value of the salary foregone.

If the ECJ follows this opinion, the ruling may well be used by VAT inspectors to make claims going back several years.

Firms using vouchers (or other salary-sacrifice arrangements that involve a potentially taxable supply) to reward staff should consider their options.