Last year the European Court of Justice ruled that UK companies may reclaim VAT input tax on the cost of entertaining overseas clients. In a new case the Advocate General has given an opinion which may allow for more claims.

He  considers that under EU law the reclaiming of VAT input tax can only be blocked in relation to specifically defined categories of services or goods, and not in relation to services or goods by the purpose for which the expenditure is incurred.

If the Advocate General is correct, HM Revenue & Customs block on the recovery of VAT input tax incurred as a result of business entertainment may be too vague, this could allow UK VAT registered  businesses to make retrospective refund claims as far back as 1 April 2006.

The European Court of Justice has yet to deliver a ruling supporting the  Advocate General’s opinion.VAT register entities which could benefit from such a ruling should  lodge protective repayment claims with HMRC as soon as possible, to avoid the risk of  the initial VAT periods after 1 April 2006 going out of date.