Recovering VAT on Staff Expenses

Although VAT rules usually prevent reclaiming of VAT on supplies that are not made direct to you, there are some circumstances where the rules are relaxed.

Certain expenses may be paid for by your employees on their daily duties and by concession HMRC will permit you to reclaim VAT paid over.

There are conditions to comply with to ensure a claim is valid

  • Subsistence Expenses

The VAT element of subsistence expenses paid to your employees may be treated as input tax. In order to qualify for this concession, employees must be reimbursed for their actual expenditure and not receive round sum allowances.

VAT invoices (which may be made out to the employee) must also be obtained.

  • Reimbursement for Road Fuel

The VAT legislation allows you to treat as your own supply fuel which is purchased by a non-taxable person whom you then repay for the actual cost of the fuel. This enables you to recover input tax when you reimburse your employees for the cost of road fuel they buy and use in carrying out their employment duties.

VAT invoices must be obtained.

  • Mileage Allowances

The VAT legislation enables you to reclaim the VAT element (or a reasonable approximation) of mileage allowances paid to employees.

Next steps

If you need further information on this subject please get in touch


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