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13th January 2009
13 January 2009
Businesses should review their VAT recovery policy for client and employee catering in light of a recent European Court ruling.
The decision means that businesses with canteens may now be able to claim back the VAT incurred on providing catering to employees and clients, according to a firm of financial advisers.
The case centred on the attempts of two businesses, Danfoss A/S and AstraZeneca A/S, to reclaim VAT on catering expenditure where they had provided food free of charge during meetings attended by both clients and staff. The food had been prepared in the canteen and consumed on the business premises.
Where meals are provided free of charge in company canteens to business contacts in the course of meetings, the meals are for business-related purposes. This means that the VAT incurred is recoverable.
Similarly, the VAT incurred on catering provided to employees will also be recoverable where it was provided to ensure that work meetings do not have to be interrupted.
"This ruling is significant for businesses that have not claimed VAT on the provision of this type of catering to clients and employees in the past, and such claims will now be possible" says, Karen Robb, VAT partner at Grant Thornton.
"It will be interesting to see how HM Revenue and Customs respond to the decision because it would be unfair if it only applies to businesses with on site canteens. VAT should, in principle, also be reclaimable where food is delivered to business premises or indeed consumed off site, provided that the cost was incurred for business purposes."
Robb believed that firms should review their VAT recovery policies to see if claim-backs can be made.
She also advised that such a review should extend to all areas where VAT may have been overpaid or under claimed in the past because claims made before 31 March 2009 can be extended beyond the normal three-year capped period.
Businesses should review their VAT recovery policy for client and employee catering in light of a recent European Court ruling.
The decision means that businesses with canteens may now be able to claim back the VAT incurred on providing catering to employees and clients, according to a firm of financial advisers.
The case centred on the attempts of two businesses, Danfoss A/S and AstraZeneca A/S, to reclaim VAT on catering expenditure where they had provided food free of charge during meetings attended by both clients and staff. The food had been prepared in the canteen and consumed on the business premises.
Where meals are provided free of charge in company canteens to business contacts in the course of meetings, the meals are for business-related purposes. This means that the VAT incurred is recoverable.
Similarly, the VAT incurred on catering provided to employees will also be recoverable where it was provided to ensure that work meetings do not have to be interrupted.
"This ruling is significant for businesses that have not claimed VAT on the provision of this type of catering to clients and employees in the past, and such claims will now be possible" says, Karen Robb, VAT partner at Grant Thornton.
"It will be interesting to see how HM Revenue and Customs respond to the decision because it would be unfair if it only applies to businesses with on site canteens. VAT should, in principle, also be reclaimable where food is delivered to business premises or indeed consumed off site, provided that the cost was incurred for business purposes."
Robb believed that firms should review their VAT recovery policies to see if claim-backs can be made.
She also advised that such a review should extend to all areas where VAT may have been overpaid or under claimed in the past because claims made before 31 March 2009 can be extended beyond the normal three-year capped period.