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Introduction

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Businesses can recover the VAT on most employee expenses but there are conditions and blocks on their recovery in some instances.

 

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Input VAT is Recoverable on the Following Employee Expenses 

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Meals

•  Meals provided via canteen facilities to staff​

• Subsistence payments made to employees for meals 

• Subsistence payments for meals made to Sole Traders, Proprietors, Directors while working away from their normal place of work.

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Hotel Accommodation

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• Cost of hotel stay while away from the normal place of work​

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Travel Cost

• Input VAT incurred on travel for Business  purposes is recoverable input VAT​

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Domestic Accommodation

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• If your business provides domestic accommodation for employees, you can treat VAT incurred on costs of providing the accommodation as input tax.

• Part of a domestic accommodation (such as a room) used as an office can be apportioned and any VAT incurred treated as the businesses recoverable input VAT. 

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Mobile Telephones Provided to Employees

• VAT on the purchase and connection of a mobile phone - Where a business provides its employees with mobile phones for business use then, regardless of whether it allows private use, it can treat as input tax all the VAT it incurs on purchasing a phone and on standing charges for keeping it connected to the network providing the charges do not contain any element for calls.

• Business only call charges - If a business does not allow its employees to make private calls, all of the VAT incurred on the call charges is input tax. HMRC will accept this is the case where a business has imposed clear rules prohibiting private use and enforces them. But HMRC realises that in practice businesses with such a policy often tolerate a small amount of private calls. HMRC is prepared to treat such minimal use as being insignificant for VAT purposes and it will not prevent a business treating all the tax it incurs on calls as input tax.

• Charges for private calls - If a business charges its employees for any private calls they make, then it may treat the VAT incurred on the calls as input tax, but must account for output tax on the amounts it charges.

• Free private calls - If a business allows its employees to make private calls without charge, then it must apportion the VAT incurred on the call charges. It is not appropriate for businesses to adopt an alternative treatment of accounting for output tax on the private use.

• Fixed monthly charges - Where the phone package allows the business to make a certain quantity of calls for a fixed monthly payment and there’s no separate standing charge, then it must apportion the VAT on the total charge for the package. Similarly, where the contract is for the purchase of the phone and the advance purchase of a set amount of call time for a single charge, the apportionment will also apply to the whole charge.

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Contains public sector information licensed under the Open Government Licence v3.0

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