As a general rule, VAT cannot be recovered on goods or services that are intended for personal use. Where a business incurs expenditure and those goods or services are subsequently used privately, this is treated as a taxable self-supply, meaning VAT may need to be accounted for on that private element.
Where business assets—such as mobile phones, vehicles or equipment—are used partly for non-business purposes, output VAT is usually chargeable unless the input VAT claim has already been restricted to reflect that private use.
Key Considerations for Personal Use VAT
When dealing with VAT on private use, the following core principles apply:
- Blocked input tax – VAT cannot be reclaimed on purchases made wholly for personal use.
- Deemed supplies – Where business assets (e.g., stock or machinery) are used privately, that use is treated as a taxable supply.
- Self-supply provisions – If goods are taken out of the business for personal use, VAT must be accounted for based on their cost to the business.
- Mixed use apportionment – Where assets are used for both business and private purposes, VAT recovery must be restricted to the business proportion only.
- Valuation rules – The VAT due on private use is generally based on the cost incurred by the business in providing the goods or services.
Using Business Goods for Private Purposes
Businesses may occasionally use their own goods or assets for non-business purposes. If the business is VAT-registered, this may create a VAT liability where:
- items are withdrawn from trading stock for personal use; or
- business equipment is used privately or made available to employees.
Such use is regarded as a taxable supply, and VAT must be accounted for at the appropriate rate. The treatment will depend on:
- whether the use is permanent or temporary; and
- whether any consideration is received in return.
Certain items, such as motor fuel, are subject to specific VAT rules when used for private purposes.
Goods Taken for Permanent Private Use
Where goods are permanently removed from the business for private purposes, VAT must be accounted for. Examples include:
- stock ordinarily sold to customers;
- goods manufactured or produced by the business;
- raw materials or components used in production;
- business consumables such as office supplies or protective clothing; and
- assets such as tools, machinery, or IT equipment.
Private use includes use by the business owner or by any third party to whom the goods are given. The VAT treatment will depend on whether any consideration is received.
Temporary Private Use of Business Assets
If business assets are made available for private use on a temporary basis, this is treated as a supply of services rather than goods.
Where no charge is made for that use, VAT is still payable based on the cost to the business of providing the asset. This also applies where the business owner uses the asset personally.
To determine the VAT due, the business should:
- calculate the annual depreciation (reduction in value) of the asset;
- establish the proportion of time the asset is used privately; and
- apply that proportion to the total annual depreciation.
Practical Tip
Where goods or services are used privately, businesses must consider the VAT implications carefully. In most cases, VAT will need to be accounted for, as such use is treated as a taxable supply—whether the use is temporary or permanent.
Disclaimer:
This newsletter is intended for general information purposes only and does not constitute tax, legal, or accounting advice. Businesses should seek professional advice before making any claims or decisions based on the information provided.
