Forties People

A new ruling by the European Court of Justice (ECJ) on voluntary benefits and salary sacrifice might cost British businesses up to £0.5 billion in unpaid taxes, experts have warned.

According to law firm BDO, a recent ECJ case involving AstraZeneca could set a new legal precedent for all future unpaid tax cases that would cost businesses over £100 million annually from now, on top of a £500 million bill to cover the last four years.

The pharmaceutical firm distributed treatment vouchers to all employees' as part of their severance pay deals, but the court has decided that it must pay VAT to Revenues & Customs on each distributed voucher as the salary sacrificed by the employees after leaving the company represents payment for them.

Marc Welby, VAT Partner at BDO, said: "This opinion from the advocate general could result in many employers who have introduced similar voucher and salary sacrifice arrangements being landed with a substantial additional tax liability.

"It will also cause confusion as the salary sacrificed is not treated as a payment for direct tax and National Insurance purposes."

Posted by James Strang