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.