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HMRC internal manual

Business Income Manual

Value Added Tax: goods for own use

Goods applied to a personal or other non-business use are a taxable supply, the VAT normally being charged on what the goods would have cost at the time they are applied to personal use, exclusive of VAT. Depending on the circumstances, this may or may not be the same as the purchase price. The precise treatment of the VAT for tax on trade profits purposes is complex and depends among other things on how the VAT on the goods for own use has been dealt with in the accounts. It will seldom be cost-effective to enquire into the treatment of VAT in a credit for goods for own use if the credit is otherwise satisfactory. However, in case the principles should need to be considered in a particular case, the following example may help.


Peter is a retail trader. He takes out of stock for own or other non-business use goods costing £100 exclusive of VAT of £20. Their retail value exclusive of VAT would be £150. He will be liable to HMRC to account for VAT of £20 on the net cost of the goods for own use.

In order to keep his books in balance, he must either include the cost of his purchases as £120 (that is not include the £20 VAT in his input tax) or, if he puts his purchases at £100 and claims the £20 as input tax, he will need to credit the VAT account with £20 on his deemed taxable supply of £100. This credit of £20 will, however, have to be offset by a debit somewhere in the accounts. This debit might, for example, be included in drawings and if this is done the credit for trade profits purposes is the retail value of £150 exclusive of VAT. If, however, the £20 is debited to profit and loss as a separate item, or if the trader takes the short cut method of including the £120 in purchases, the credit ought in strictness to be £170.