Tax & Accounting News

New ruling on expenses claims

26/04/2010

The current rules surrounding entertainment expenses state that it is not possible to reclaim the VAT on these, but a recent decision in the European courts may be about to change this.

The EU Advocate General (AG), who provides legal opinions to the court, said the laws in some countries in the EU, which block the reclaiming of VAT on entertainment costs, were too vague. He said that, under EU law, any such restriction must state which specific goods and services are excluded.

Although the ruling related to two Dutch companies, it will apply equally to all VAT-registered businesses across the European Union, provided the European Court accepts the AG’s decision (which it generally does).

This could mean that businesses in the UK, where such a block is currently in effect, could soon be able to claim back the VAT on current expenses, and also claim back the VAT from previous years.

Not all entertaining costs will be affected by the decision, as generally any gifts have to have a direct link to the business. There will also be a four-year limit on any retrospective claims.

While businesses will have to await a final decision from the European Court, it may be a good idea to start compiling the details now, so that any claim can be filed more quickly when the time comes. For more information, please contact us.