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Limited recovery

22 February 2011
Issue: 4293 / Categories: Forum & Feedback , VAT
HMRC are still considering the judgments in the VNLTO and AstraZeneca cases concerning private and non-business use. Input tax can be recovered, but there appears to be some doubt as to the treatment of the VAT output tax

My company has been considering setting up a cycle-to-work scheme for its employees.

While I am happy with the direct tax side of things I am unclear on the correct VAT position. 

Essentially the scheme operates by the employer purchasing a bicycle and then lending it to the employee for a year during which time the employee takes a reduced salary.
The commercially marketed schemes state that the employer can reclaim all of the VAT on the cycles purchased. 
Similarly section 7 of the Department for Transport guidance says that HMRC accept that the input tax may be recovered. It then goes on to say that no output tax is due where there is no charge to the employee.
Against this HMRC now regard it as necessary to limit the VAT recovery where there is personal use of a computer...

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