VIT43700 - Specific issues: employee rewards and perks
Sometimes a business might provide their employees with certain perks and rewards. These may take the form of either goods or services.
Such goods or services are a legitimate business expense. They are provided for the purposes of the business, mainly to reward or motivate staff. Because of this the VAT incurred is all input tax. No apportionment under section 24(5) of the VAT Act 1994 is necessary.
Sometimes a charge to output tax for private use may have to be made (see VIT25000) or a supply of goods may have taken place. The treatment differs in the case of goods or services; the guidance for VAT Supply and Consideration gives further guidance of when output tax is due and the value of that supply (see VATSC Supply and consideration).
Where facilities are provided to all employees strictly for the purposes of the business it is generally not our policy to apply such a charge. However perks provided to specific individuals within a business should generally be subject to an output tax charge to reflect private use (see VIT25000).
Examples of where the private use charge may apply:
Rewards to staff:
The tax on the purchase is deductible but output tax will be due when the gift is made if a car dealer provides a successful salesman with a crate of champagne.
Loans to staff:
Output tax is due on the loan if a builder lends equipment to their staff for personal use.
Services provided free to employees:
Output tax is due on the cost if an employee is given free membership of a local golf club partly to entertain clients but which also allows him private play.