The European Court of Justice’ (ECJ) ruling in the case of EMI (C-581/08, EMI Group Ltd v The Commissioners for Her Majesty’s Revenue & Customs) may mean that free promotional samples distributed to public are entitled to a VAT rebate.
EMI distributed free music recordings to promote new releases between 1987 and 2003 and argued that it was a method used to test products in the marketplace. HMRC argued that EMI should pay VAT on the cost of each free sample given. The ECJ sought to evaluate whether the free distributions were samples or gifts of small value, and said samples were intended to promote sales and weren’t necessarily covered by VAT or sales taxes.
Now that the ECJ has found the case in favour of EMI, if a UK court could determine that they were indeed samples then the company could claim back the overpaid VAT amount.
