VAT and home PCs
HMRC have published their revised policy on the VAT treatment of computers made available by employers for use in their employees' homes, following the withdrawal of the tax exemption which allowed employers to loan computer equipment to their employees tax free in April 2006.
VAT and home PCs
HMRC have published their revised policy on the VAT treatment of computers made available by employers for use in their employees' homes, following the withdrawal of the tax exemption which allowed employers to loan computer equipment to their employees tax free in April 2006.
HMRC's policy to allow full VAT recovery without any adjustment for private use, in circumstances where there is any business use, is withdrawn from 14 August 2007. With immediate effect businesses must consider why the computer is being provided to the employee to determine the level of VAT that can be claimed. Businesses will only be able to claim full VAT recovery without any requirement to account for VAT on any private use (subject to any restriction in respect of exempt supplies) where the provision of a computer is necessary for the employee to carry out the duties of his employment. In these circumstances HMRC's view is that it is unlikely that any private use will be significant when compared with the business need for providing the computer in the first place. This mirrors the approach taken for direct tax concerning exemptions for work related benefits in kind where there is no significant private use.
Where a business cannot demonstrate that it is necessary to provide an employee with a computer in order to carry out the duties of his employment, only a portion of the VAT incurred will be recoverable as input tax. HMRC will accept any method of apportioning the VAT incurred as long as the result fairly and reasonably reflects the extent of business use. HMRC say that they may be able to agree a set percentage based on a representative period.
Where a business continues to provide a computer under an existing home computer initiative agreement, full VAT recovery can continue until the agreement (normally three years) has expired. Further information on these transitional provisions is contained in HMRC's Employment Income Manual para EIM2699.
HMRC Business Brief 55/07, 13 August 2007
