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HMRC internal manual

Employment Income Manual

From
HM Revenue & Customs
Updated
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Value Added Tax: inter-relation with earnings and expenses: deductions for expenses

Part 5, Chapter 2 ITEPA 2003

Where a deduction for expenses can be permitted under Part 5, Chapter 2 ITEPA 2003 the amount to be deducted for any expense should normally include the full amount of VAT, whether or not the employer may subsequently recover all or part of it.

Where, exceptionally, an expenses deduction can be made against the charge on a benefit based on the cost of providing an asset for a director etc, the VAT included in the deduction should not exceed the VAT included in arriving at the amount of the benefit.