Astra Zeneca argued that costs associated with the acquiring of retail vouchers for their employees (in lieu of cash remuneration) was a business overhead on which it should be able to deduct input tax. It also argued that the vouchers were being provided to its employees for no consideration and it should be permitted not to charge output tax for them.

The ECJ, agreeing with the Advocate-General, found that the vouchers included VAT when being redeemed with the retailer, and that consideration for the vouchers was the foregoing of employee remuneration. The supply thus fell under the Principal VAT Directive, and attracted VAT.

This case has significant implications for employers who have claimed input VAT on their voucher schemes, but have not accounted for the corresponding output VAT on the supply. Where VAT has been accounted for on the supply to employees, those complications should not arise.