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The taxman has issued new guidance on the VAT treatment of computers made available by employers for use in their employee’s homes. The move confirms that as of August 13, the department’s old policy of allowing full VAT recovery where there is any business use, regardless of private use, has been withdrawn. The change in policy follows the abandonment of the Home Computer Initiative for direct tax purposes in the Budget last year, a move which has been condemned by Intellect, the hi-tech trade body. The Institute of Chartered Accountants in England & Wales says it is now necessary to consider why a computer is being provided to an employee to determine the level of VAT that can be claimed. Full VAT recovery is only claimable, subject to any partial exemption restrictions and without any requirement to account for VAT on any private use, where supplying a computer is necessary for the employee to carry out the duty of work. 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. The ICAEW said this mirrors the approach taken for direct tax concerning exemptions for work related benefits in kind where there is no significant private use. The group added: “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 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. In such circumstances, it may be possible to agree a set percentage with HMRC based on a representative period.” 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. Aug 22, 2007 Email this article Printer friendly page Previous Page
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