VAT recovery opportunity

Date published: 05/02/2010

A Dutch case being heard in the European Court could give rise to an opportunity to reclaim blocked VAT on business entertainment costs.

The Advocate Generale (AG) has issued an opinion, which, if the Court upholds, will give UK taxpayers grounds to challenge the UK blocking order. In most cases, the Court does follow the AG's opinion.

The AG has indicated that, where an input VAT 'standstill blocking' provision does not define sufficiently closely the nature of the specific goods and services in respect of which recovery is precluded, the provision may not be compliant with the requirements of the EU legislation, in which case the 'blocking' of input VAT may be ultra vires.

In the UK, the 'blocking' of input VAT in respect of business entertainment is drafted in a similar way to those of the Dutch national legislation which is currently being considered in the Court. Therefore, if the Court agrees with the AG's opinion, UK businesses may be entitled to retrospective recovery, and should consider protecting their position by submitting claims or extending existing claims.