Landmark VAT ruling set to benefit cosmetic sampling businesses
Manufacturers stand to gain a VAT refund
A landmark ruling by the European Court of Justice (ECJ) is set to benefit UK cosmetics manufacturers who give away promotional samples. The ECJ has held that no VAT is due on samples given to promoters and the media following its judgement finding in favour of music company EMI concerning the UK VAT treatment of sample goods and business gifts.
In addition any business that produces free samples for promotional purposes stands to gain from a retrospective VAT refund, capped at four years. Businesses affected by this are urged to lodge their claim as soon as possible.
“The ECJ’s interpretation of the VAT law is completely logical,” comments Hannah Dobson, VAT director at accountancy and financial services group, Smith & Williamson. “Manufacturers up and down the country have regularly given away promotional products. Although no money is received for such promotional goods, the donor business previously had to pay VAT on the value of the items, putting them heavily out of pocket.”