The free use of goods-assets, or provision of goods-assets for free, has become common practice amongst EU businesses, however the VAT treatment is often problemtic. Such examples of this practice include when a sample of goods or services is provided for free for commercial purposes, possibly with a view to promoting other areas of the business that will lead to the generation of VATable income. The European Court of Justice have ruled in favour of a Lithuanian company (Sveda) who provided free access to a “Baltic mythological recreation discovery path†which contained food and drink outlets as well as various other shops, all operated by Sveda, where users of the path could purchase a wide variety of items. Upon refurbishment of this discovery path, Sveda deducted the input VAT which local authorities argued stated was incurred in relation to a non-business activity, namely providing free access to the path. This decision was appealed and the ECJ ruled that the input VAT was deductible on the basis that the provision of free access to the discovery path was made with the intention of increasing VATable sales in their outlets therefore making a direct and immediate link with the company's economic activities. Cases of this nature should be distinguished from the use of a business asset for private use resulting in restricted VAT recovery. If you think Sveda's case is relevant to activity you or your client are undertaking, discuss your VAT situation with one of our expert consultants to ensure you are acting within UK VAT law.

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