It's time to get those tatty receipts for late night curries and sensible business lunches out from that old tin box, an expert has warned.

Tony Jackson, VAT Director in the Birmingham office of BTG Tax, says they could yet prove highly lucrative.

He warned: "Historically a business has seldom been able to recover input VAT on business entertaining expenditure.

"However, two European Court of Justice decisions have called into question the legal basis for this. The Advocate General has said that, for input tax to be blocked, the legislation must clearly define the goods and services affected. For instance, 'food, drink or accommodation' is probably clear enough to meet the test.

"However, 'gifts or entertainment' may be too wide in scope to be valid from an EU law perspective."

He went on: "In the UK, the blocking of input tax on business entertainment is already very topical following the Danfoss decision. It must be noted, of course, that this is only the Advocate General's opinion and the European Court of Justice may decide not to follow it.

"However, given that most businesses incur entertaining expenditure to a greater or lesser extent, for a genuine business reason, it may have very wide significance."

Mr Jackson said BTG Tax is now monitoring developments, including the reaction of HM Revenue & Customs, to determine whether there is a realistic possibility of arguing that UK legislation does not conform to EU law. In the meantime he is advising clients to make protective claims for the past four years.