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HMRC internal manual

VAT Input Tax

Specific issues: subsistence

Notice 700 Section 12 explains when a business can recover VAT on subsistence costs.

A business cannot claim VAT when a fixed allowance is paid to an employee even if tax invoices are held. This is because no supply is made to the business.

Sometimes a business can claim VAT when:

  • the traveller is not an employee; or
  • the accommodation is close to the normal workplace.

Imagine a business pays for a sole trader or partner to stay at a hotel because a rail strike makes it hard for them to get to work. This is a business expense and so VAT can be recovered.