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Sadly Steve Allen died in July 2011. His wife Leah would like to thank all those who know Steve and helped contribute to his success. She has recommends Steve's clients and anyone who is interested in this article topic to contact Rob McCann from “The Vat people” on (tel) 0161 477 6600 . Please make reference to Steve Allen.

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VATman changes policy on computers supplied to staff in their homes

On 14 August 2007 the VATman issued Revenue & Customs Brief 55/07 notifying businesses of a change in policy regarding VAT recovery on computers made available by employers to their staff for use at home. The gist of the Brief is that, whilst the Home Computers Initiative remained in place, HMRC effectively disregarded the VAT consequences of any private use but, now that the HCI has come to an end, HMRC will expect employers to identify private use and account for VAT accordingly.

This follows withdrawal of the direct tax exemption, introduced in April 1999, which allowed employers to loan computer equipment to their employees tax free. In January 2004 the Government launched the Home Computer Initiative which encouraged employers and employees to take advantage of the exemption

The VATman’s policy to allow full VAT recovery without any adjustment for private use providing there was some business use been withdrawn from 14 August 2007.

Businesses will only be able to claim full VAT recovery without any requirement to account for VAT on any private use 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.

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 then only a portion of the VAT incurred can be reclaimed. HMRC will accept any method of apportioning the VAT incurred as long as the result fairly and reasonably reflects the extent of business use.

Where a business continues to provide a computer under an existing HCI agreement full VAT recovery can continue until the agreement (normally 3 years) has expired.

About the Author

Steve Allen is the Director of VAT Solutions (UK) Ltd, an established independent firm of Chartered Tax Advisers, formed by Andrew Needham and Steve Allen. Both not only are respected tax advisers, but have worked for both Customs & Excise and one of the top four accountancy firms for many years. This mean that their team know both sides of the equation and are truly experts in this field.

The company has a cross-section of clients from multi-national companies through to medium-sized and numerous smaller regional firms of accountants and solicitors. They produce a regular publication 'VAT Voice', which can be downloaded directly from their website

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Article Published/Sorted/Amended on Scopulus 2007-09-08 15:48:26 in Tax Articles

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