Statement of Practice A6
Published 31 March 1978
© Crown copyright 1978
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The introduction of VAT on 1 April 1973 affected, in some instances, the amount of the emoluments chargeable to Income Tax under Schedule E, and the amount to which the PAYE (Pay As You Earn) procedure should be applied. The main circumstances in which this situation will arise are summarised below, and it is anticipated that all of the relevant information will be available to the employer in the records which he will maintain for general VAT purposes.
Expenses incurred by employees etc and reimbursed by their employer
1. The amount to be entered by an employer on his return of expenses payments on Forms P9D and P11D, or by an employee etc when claiming a deduction for expenses, should include any amount paid in respect of VAT, which is reimbursed, whether or not the employer may subsequently recover all or part of that VAT by repayment or set-off.
Benefits etc
2. Where a director or employee is liable to Income Tax in respect of payments made to him or on his behalf by his employer or in respect of expenses incurred by the employer in providing him with a benefit the liability is on the full amount of the expenditure incurred, inclusive of VAT. This is so whether or not the employer may subsequently recover all or part of the VAT by repayment or set-off.
Sums paid for services to certain professional persons
3. VATA 1994 s 94(4) provides that a person who, in the course of carrying on a trade, profession or vocation, accepts an office, other than a public office, is subject to VAT in respect of any services supplied by him as the holder of the office.
Where the earnings payable to such a person are subject to tax as employment income, deductible under PAYE, and also to VAT, the earnings to which PAYE is applied should not include the VAT element of any payment.
Note
This statement was revised in IR 131 (August 2003).