EMI wins sample goods case and paves the way for UK industry VAT windfall

EMI wins sample goods case and paves the way for UK industry VAT windfall

The European Court of Justice (ECJ) ruled in favour of EMI yesterday in a case concerning the UK value added tax (VAT) treatment of sample goods and business gifts given free of charge by EMI in marketing and promotional activities. The ECJ has ruled that no VAT is due on sample CDs given to promoters and the media to promote a new album or an artist’s music. UK law requires VAT to be charged on all but one sample given to the same person, so for example if many CDs are given to pluggers to distribute onwards to industry contacts then VAT would be payable. The judgement means that the UK and several other EU member states will likely be forced to change VAT rules on the treatment of samples and business gifts. The court case began when EMI contested £3.3m pounds it paid in VAT on promotional CDs issued between 1987 and 2003. Lorraine Parkin, head of VAT at Grant Thornton UK LLP recommends that any company that has paid VAT on business samples should lodge a claim for a refund of overpayments made in the last four years. The case could set a big precedent for the industry in the UK, which could benefit from widespread VAT refunds. Simple interest could also be due to claimants in addition to the tax.

Source: http://musically.com/blog/2010/10/01/emi-wins-sample-goods-case-and-paves-the-way-for-uk-industry-vat-windfall/