HMRC have issued guidance on a change in their policy regarding VAT recovery on computers. The rules affect computers which are made available by employers to their employees for their personal home use. The change in guidance is as a result of the withdrawal of the favourable benefit in kind treatment which used to apply to employees who were loaned computer equipment for personal use at home. When the favourable benefit in kind treatment applied HMRC effectively disregarded the VAT implications of private use of the asset.  Employers who have already loaned employees computers prior to the change in the benefit in kind rules do not have to change the VAT treatment of these assets and related costs.

HMRC will now expect businesses to identify private use and account for VAT on the private use. This is the treatment that should be applied to other business assets where private use is allowed such as mobile phones.

This change in policy will not affect businesses where computers are made available to employees who need the computer in order to carry out their job. 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.

If an employer is unable to 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 can be reclaimed.

Internet link: HMRC VAT Brief