The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
This guidance note provides an overview of when VAT can be recovered on employee related expenses. This note should be read in conjunction with the What is input tax and Evidence for claiming input tax guidance note. Further information on other expenses that could be employee related can be found in the Reclaiming input tax on miscellaneous expenses guidance note.
It is common practice for employees to purchase items and to be reimbursed by the employer for the costs incurred. Employers are entitled to recover the VAT incurred on the supplies made to employees in the following situations (this list is not exhaustive):
If the employer can clearly demonstrate that the costs have been incurred for legitimate business purposes, then the VAT incurred on the costs can be recovered.
It is very common for businesses to have a number of self-employed contractors who act in the same manner as an employee of the business. Historically, HMRC has attempted to deny the business the right to recover VAT on the reimbursement of expenses to the self-employed members of staff. However, tribunal decisions have increasingly been decided in favour of the business, so HMRC now accepts that costs incurred by these types of staff members can be recovered providing that the following conditions are satisfied.
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