HMRC revises its policy on VAT around home computers

HM Revenue & Customs (HMRC) has issued a brief revising its policy on the treatment of VAT for computers made available by employers to staff to use at home.

Following the withdrawal of Home Computer Initiative (HCI) in April 2006 which allowed employers to loan computer equipment to employees tax free, employers were still able to claim full VAT recovery for equipment provided to staff to use at home for business without making an adjustment for private use. The HMRC has now withdrawn that policy.

HMRC’s revision means that businesses must now have to take into account why the employee needs the computer in order to determine the level of VAT that can be claimed. They will only be able to claim full VAT, without having to account for VAT on any private use, where the employee needs the computer to fulfil their work duties. Where the employer is unable to show that the employee needs the computer to carry out the duties of their employment then only a portion of the VAT incurred will be recoverable.