EMI Group plc v HMRC (ECJ Case C-581/08) – EMI were seeking clarification of whether they needed to account for VAT on sample CDs provided to promoters and media businesses; the particular question was over the VAT treatment that applied when they provided several CDs to one promoter. UK VAT law allows only the first sample given to someone to be VAT-free (as a supply not for consideration) so that, where several CDs were provided to a promoter for that promoter to pass on to contacts, HMRC wanted EMI to account for VAT on all except the first CD. The matter arrived at the Commissioners in 2004, who referred the question of what constitutes a sample to the ECJ.
The ECJ held that a ‘sample’ is ‘a specimen of a product which is intended to promote the sales of that product and which allows the characteristics and qualities of that product to be assessed without resulting in final consumption, other than where final consumption is inherent in such promotional transactions. That term cannot be limited, in a general way, by national legislation to specimens presented in a form which is not available for sale or to the first of a series of identical specimens given by a taxable person to the same recipient, unless that legislation allows account to be taken of the nature of the product represented and of the specific business context of each transaction in which those specimens are distributed’.
Broadly, this means that a business can give several VAT-free samples to a promoter for that promoter to pass on, but that the samples should be clearly labelled as such to reduce the risk of the samples entering the normal sales chain.