Posted by Nick Day on 30 Mar 2012

VAT Changes Affect Employee Benefits

A new 20% VAT liability on many employee benefits came into force on 1 January 2012 as a result of a European Court of Justice decision. Benefits such as gym membership, subsidised meals at work and shopping vouchers are all affected. Employers must either charge the employee output tax based on the value of the benefit or not reclaim input tax relating to these supplies at a cost to the business.

The VAT charge does not affect benefits such as workplace gyms that are available to all staff. Salary sacrifice contracts dated on or before 27 July 2011 are not affected until they are renegotiated or renewed.

Businesses that provide benefits by way of salary sacrifice should now be reviewing their benefit packages to see which benefits will attract the VAT charge. We recommend that any business that is concerned about how they are affected by the changes should contact us for professional advice.

If you need advice on the above points please contact us on 01962 856 990 or email


See also…

Time to reconsider use of the VAT Flat Rate Scheme?

Possible Post-Brexit VAT Issue for Importers

VAT Registration


When to Register for VAT

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