VATSC05882 - Consideration: Payments that are Consideration: Salary sacrifice: Payments deduction from salary cases

Astra Zeneca (Case C-40/09)

Astra Zeneca operated a flexible salary package under which employees could opt to take part of their salary in the form of goods or services. One of the benefits employees could choose was retail vouchers. The CJEU found that the provision of retail vouchers was a supply for a consideration. It found there was a direct link between the provision of the vouchers by the business to its employees and the part of the cash remuneration the employees gave up. It regarded this as consideration expressed in money, since it corresponded to the amount of salary forgone. As a consequence, whilst Astra Zeneca was able to recover VAT on acquiring the vouchers, output VAT was due on the consideration received from employees.

The judgment supports our existing policy that payment deductions from salaries are consideration for the taxable supply for VAT purposes.