Waqar Shah and Tabassum Khan have co-authored a piece in Taxation Magazine on the Court of Justice of the European Union's judgment in the GE Aircraft Engine Services Ltd case in November 2022.
The ruling was a success for the Mishcon de Reya Tax Disputes team and is significant in setting out the CJEU's position on the VAT implications for the supply of vouchers from a taxable person to its staff.
Waqar and Tabassum wrote: "The CJEU judgment is a welcome conclusion to the incentive scheme saga, providing a clear and concise position on the business purpose/private use debate. It also marks one of the last successful VAT referrals to the CJEU from the UK.
The question of the VAT implications for the supply of vouchers was initially considered by the First-tier Tribunal (Tax Chamber) before it was referred to the CJEU. Given that the tribunal did not issue a decision on this appeal and the nature of the AG’s opinion, it was imperative to have the CJEU’s firm stance on the business purpose versus private use test. The outcome was evidently a matter that was resolved on the specific facts (the CJEU commenting on the ‘essence’ of the GE scheme deriving from the documents presented) and does demonstrate that identifying a business purpose is by no means clear cut. The case also demonstrates the value of clarifying the facts and the underlying reason before embarking upon litigation.
GE operated a sophisticated scheme that involved a number of levels of review, a nomination process, and a range of awards. It was not put in place to replace any form of salary or remuneration and it was clear that business factors drove the popularity of the scheme. The outcome will also provide useful guidance to businesses and employers with similar voucher incentivisation schemes."
View the full piece.