Commentary

V6.112 VAT recovery and practical points for accountants

Part V6 Business by business

V6.112 VAT recovery and practical points for accountants

V6.112 VAT recovery and practical points for accountants

VAT recovery

Except where an accountant also carries on other non-accountancy business, it should normally be able to recover all of its input tax except for the following:

  1.  

    •     VAT which is blocked by statute as set out in V3.440–V3.450

  2.  

    •     VAT relating to exempt supplies such as some corporate finance services and some intermediary services in relation to financial services and insurance (although see below for discussion of the partial exemption de minimis rules)

Employee expenditure, subsistence and business entertainment

VAT on employee-related expenditure is intrinsically deductible but there are exceptions.

In general terms, VAT on expenditure incurred by staff and charged to client codes is likely to be deductible unless it constitutes business entertainment. This includes VAT on accommodation, subsistence expenditure and travel, although see V3.436 in relation the reimbursement of road fuel to employees.

For detailed description of the circumstances in which VAT can and can't be recovered in relation to business and staff entertainment see V3.446.

Staff relocation

Generally HMRC will view employee relocation expenditure as input tax as set out in V3.422.

Expenditure of partners or sole proprietors

Although the directors, or anyone engaged in the management, of a company are specifically included within the definition of 'employees' of a company for the purposes of the business entertainment rules, there is no

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