ECJ Case – VAT on meals
A recent ECJ VAT case concerned a Danish business that provided meals from its canteens to staff and business customers free of charge.
The specifics of the case involved whether there was restriction of input tax recovery in respect of these meals. The Commission found that there was no ‘deemed supply’ on which VAT was due and neither was there a restriction to the recovery of input VAT where the catering is strictly for the purposes of the business. The ECJ ruled in favour of the taxpayer.
This ruling is likely to mean that UK businesses will be in a position to recover up to three years worth of VAT which has been blocked on meals provided to business customers or employees. This VAT would usually have been blocked as relating to “business entertainment” which was the case for most expenditure relating to business customers. The ruling in this case suggests that where food is provided strictly for business purposes the VAT element should be recoverable. In the judgement, the Commission suggested that this is typically the case whereby “the needs of the company, such as the need to ensure that work meetings are run smoothly and without interruptions, require the employer to ensure that meals are provided”.