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HMRC internal manual

VAT Input Tax

HM Revenue & Customs
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Specific issues: information technology supplied for homeworking

Employers may provide computer equipment to employees so that they can work at home. If the computers are not put to any business use then the tax incurred on the machines is not input tax.

An employer may intend that some home business and some private use will occur. In that case an apportionment should be made to account for business/private use. The way of working out the apportionment should be kept simple. It should not put any substantial burden on the business to keep supporting records. It should also be simple for HMRC to check how the apportionment has been worked out.

HMRC accepts that computers are widely used in business. So encouraging greater staff computer literacy can be a business purpose for employers. We accept that employers might do this by providing their staff with computers for use at home.

Where the VAT incurred on the cost of the computers is recovered in full a charge to output tax for private use may be necessary (see VIT25000) or a supply of goods may have taken place. The guidance on VAT Supply and Consideration tells you more about when output tax is due. It also tells you more about the value of that supply (see VATSC Supply and consideration).

If the equipment is provided for a charge then the tax incurred on the cost is input tax. This is so even if the machine will not be used for the employer’s normal business. It is because the employer now also has a business activity of hiring out computers and the cost relates to this. The hire will be a taxable supply. Output tax should be accounted for on the value of this supply.