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 paid 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.

Click here for guidance on VAT and the place of supply.

Click here for guidance on VAT on business assets with an element of private use.