In its judgment in the case of Astra Zeneca UK Limited v HRMC, the European Court of Justice has followed the Advocate General's opinion that part payment of salary to employees in the form of vouchers is a taxable supply for VAT purposes.

The effect of the ECJ decision is that, whilst employers who make voucher payments to employees will still receive credit for the input VAT they incur when purchasing vouchers, HMRC will also now be able to assess employers for the output VAT that they should account for on the supply of vouchers to their employees. However, in the past, HMRC has largely accepted employers' practice of not accounting for output VAT on salary sacrifice schemes and it will be interesting to note what direction HMRC's policy will take following the ECJ decision.