VAT recovery on expenditure relating to business entertainment has been blocked in the UK. However it is possible that this treatment may change when the final result in a European Court of Justice (“ECJ”) case is released later this year. An initial opinion in the favour of the taxpayers has recently been provided by the Advocate General in the case which relates to 2 Dutch companies. It is usual for the final decision of the judges to follow the Advocate General’s opinion.

If the ECJ finds that the blocking of VAT recovery on business entertainment in the Netherlands has been ultra vires, it is likely that the same principles will apply in the UK. In this case, UK VAT registered businesses could be entitled to refunds of VAT previously not recovered on business entertainment. Claims for refunds of VAT can be made for the last 4 years; the exact dates will depend on the taxpayer’s VAT return periods. Businesses might want to consider submitting protective claims at least for earlier periods to ensure that they do not lose their entitlement to a refund.

For further information:

If you would like further information on any VAT related issues please contact Julie Towers or Liam Dushynsky who will be happy to assist.

Francis Clark has offices in Exeter, Plymouth, Salisbury, Taunton, Tavistock, Torquay and Truro. Francis Clark is the winner of the ‘Auditor of the Year - Mid Tier’ in the National Financial Directors’ Excellence Awards 2011, and LexisNexis Best General Tax Practice Award 2009. More information is available by logging on at our Online Information Centre