Labels Win VAT Over Promo CD Case

Written by the B&B Crew Tuesday, 05 October 2010 20:00

News -

UK labels are expecting a massive tax windfall after a Europeant Court Of Justice decision that confirms UK’s rules on the VAT treatment of promos and other business samples were incorrect.

The decision follows a long running case between EMI and HM Revenu & Customs. EMI argued they should not be paying VAT on the thousands of promo CDs it issued between 1987 and 2003, which sums up to a Total of £3.3m

EMI argued that the distribution of promos is a necassy part of the business to asses the commercial quality of a track as well as its viability on the market. Revenue & Customs refused to refund which resulted in the legal battle moving to Europe. The ECJ now ruled UK tax authorities are out of line with EC law and wrong to require EMI and other companies to pay VAT over promo CDs.

UK LLP head of VAT Lorrain Parkin statest hat supplying CD promos to journalists and TV broadcasters is a well established practice in the industry. She recommend that any company that has been paying VAT on samples should claim it as soon as possible. She added that under the current rules, interest would also be due to the claimant in addition to the tax.

An HMRC spokes says “The judgment does not mean that all the UK’s legislation on samples and business gifts is wrong. In principle they are relieved from VAT, and the ECJ has not ruled against restricting the scope of that relief where appropriate. We will need to carefully consider the judgment and determine the extent to which UK legislation may require amending."