This guidance note provides an overview of when VAT can be recovered on employee related expenses.VIT40000; De Voil Indirect Tax Service V3.422 (subscription sensitive)

What are employee expenses?

It is common practice for employees to purchase items and to be reimbursed by the employer for the costs incurred. Employers are entitled to recover the VAT incurred on the supplies made to employees in the following situations (this list is not exhaustive):

  • road fuel and other motoring expenses
  • subsistence expenses where an employee pays for meals and drinks, etc whilst away from their normal workplace on company business
  • removal expenses connected with employee relocation and staff transfers
  • purchase of sundry items, such as tools, materials, etc

If the employer can clearly demonstrate that the costs have been incurred for legitimate business purposes then the VAT incurred on the costs can be recovered.

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