PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.
If your business has followed the common practice of giving trade samples, your VAT returns will have been prepared on the basis that a single sample could be supplied to a person as a VAT-free supply but where a larger number of samples was given, output tax was payable.
Recently, HM Revenue and Customs have accepted that a decision of the European Court of Justice means that all trade samples supplied are VAT-free. Accordingly, where output tax has been paid on samples supplied, the VAT is recoverable subject to the usual time restrictions.
Full details are contained in HMRC Brief 51/10. It should be noted that the treatment applies only to trade samples, not to trade gifts, which continue to be taxable.