VAT on Cost of Mobile Phone

VAT on Cost of Mobile Phone

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Company is buying new handsets and has set limit on the cost. If an employee requests more expensive handset they will make a personal contribution for the difference back to the company. The employees will gain no rights over the phone and will not receive any reimbursement should the phone subsequently be sold. Does the company have to account for output VAT on the contribution received from the employee?

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By shaun king
01st Nov 2013 10:54

Simple answer

Yes output tax is due as there is a consideration payable by the employee for an upgarde, which is a supply of services by the employer 

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By neileg
01st Nov 2013 13:51

I'm not so sure

I think contributions by employees towards the cost of a benfit in kind is outside the scope of VAT - I just can't find the relevant reference.

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By Steve Kesby
01st Nov 2013 14:05

@ Neil

AstraZeneca?

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By neileg
01st Nov 2013 14:17

@ Steve

Yes, but this isn't a parallel with AstraZeneca. I know AZ is considered to have brought lots of benefits inside the VAT fence but this is a capital contribution to the employer not the consideration for the whole benefit.

I may well be wrong but I don't think this is a simple standard rated supply.

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By shaun king
01st Nov 2013 17:13

I think you are wrong!!

I cannot see how a benefit in kind has anything to do with VAT. If an employee pays towards an upgrade for a car - are we saying there is no VAT charge on the contribution towards the increased cost. If you were correct the basic phone costs £100 plus £20 VAT but the employee wants one costing £150 plus £30 VAT. the employee pays £60 inc VAT towards upgrade. Employer pays £120 but gets a £30 input tax deductio, so net cost to him is £90 and not £100.

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