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Using goods privately

Businesses often supply their own goods and services for private use. You may have to account for VAT on them if you鈥檙e VAT-registered and your business:

• buys and sells goods, and you take something from stock for your own private use
• uses equipment like tools and machinery and you lend something to an employee

If goods belonging to your business are used privately then you鈥檙e making a VAT taxable supply and you鈥檒l have to account for VAT at the appropriate rate. The way you account for the VAT depends on:

• whether you鈥檝e given the goods away permanently or just lent them
• whether or not you received a 鈥榗辞苍蝉颈诲别谤补迟颈辞苍鈥�

Some things, like motor fuel, have their own special rules for dealing with the VAT when they鈥檙e used privately.

Goods supplied for permanent private use

You鈥檒l have to account for VAT on goods taken out of your business permanently for private use. These goods might include:

• items from stock that you would normally sell to customers
• goods that your business makes or produces
• materials that your business uses to make things
• business supplies, like office supplies and protective clothing that you keep in your stores
• business assets, like computers, tools and machinery that your business uses

Private use includes use by you, or someone else you give the goods to. The way you should account for the VAT depends on whether or not you receive a consideration in return for the goods.

Goods supplied for temporary private use

If you make items owned by your business available for temporary private use, either by using them personally or by lending them to someone else, then you鈥檙e making a VAT taxable supply of services.

If you let someone use a business asset and receive nothing in return then VAT is due on the cost to your business of lending it. This will be the same if you use the item yourself.

To work out the cost of the supply you鈥檒l need to:

• take the amount that the item reduces in value during the year (depreciation)
• work out how much of the year the item is used privately
• apply that figure to the yearly depreciation figure

Motor fuel you use privately

You and your employees might use either your own vehicles or those owned by the business for a mix of business and private motoring. If your business pays for the fuel then you can usually reclaim all of the VAT you pay on it as long as you use the appropriate 鈥榝uel scale charge鈥� to account for output tax on the fuel used privately. Or, you could either reclaim just the business proportion of the VAT or not reclaim any VAT.

You may also be able to reclaim all of the VAT on repairs, maintenance and certain other motoring costs your business pays for as long as the vehicle is at least partly used for business purposes.

Services you use privately

You might sometimes purchase services for your business but then put them to private or non-business use. This includes making private use of the services yourself or making the services available to others for their own private use. If you do this, your business may be making a VAT taxable supply of services on which you need to account for VAT.

VAT is due on the cost to your business of making the services available for private use. You can use various methods to work out the cost, as long as you come up with a fair and reasonable figure. For example, you can use a similar method to the one that鈥檚 used for 鈥楪oods supplied for temporary private use鈥� and:

• think of the service as a 鈥榖usiness asset鈥� and work out how much it鈥檚 worth
• work out how much the asset would reduce in value during the year (depreciation)
• work out how much of the year the asset is used privately
• apply that figure to the yearly depreciation figure

This is only a suggested method, and if you want to use a different one and you鈥檇 like to talk it through, you can contact the HMRC VAT Helpline.

Continuous services you use privately

If your business buys continuous services that are used privately, such as your telephone, you can only reclaim the VAT on the business use. For example, if your business use comes to 60% of total usage then you would only be able to reclaim VAT on 60% of the cost. Dividing the cost of something between business and private use is called 鈥榓pportionment鈥�.

Goods you put to use in your own business

If your business produces goods, or if it buys and sells them, you might use these in the business instead of selling them on.

There鈥檚 not usually any VAT due on goods that you use like this because you haven鈥檛 made a VAT taxable supply. But there are a few exceptions, including cars that motor traders put to use in their own business. These exceptions are known as 鈥榯axable self-supplies鈥�. You must make a note in your VAT records of goods you use within the business.

Self-supply of cars

If you鈥檙e a motor manufacturer or dealer and you take a car from your stock to use in your own business, then this is a taxable self-supply. You鈥檒l need to account for VAT on the supply.

Other taxable self-supplies

There are a few other situations when goods that you put to use in your own business are treated as VAT taxable self-supplies. These are:

• certain non-domestic buildings that you use your own labour to construct or extend
• cars that you claimed input tax for because they were to be used as a taxi, self-drive hire car or driving school car, but then put to some other use

Things you buy for the business but then sell to someone

If you buy something for use in the business but later sell it to a customer then VAT is due on the amount you sell it for. This includes selling it to one of your employees.

Considerations

A consideration is a payment, but it doesn鈥檛 have to be money. It could be many other things, such as an agreement to do something in return for the goods, or in return for the use of the goods.

If you鈥檝e:

• given the goods away permanently then you鈥檝e made a supply of goods for VAT purposes
• just lent the goods temporarily then you鈥檝e made a supply of services
• given away an asset as a business gift, there鈥檚 no VAT due if the total cost of all gifts made to the same person in the same year is no more than 拢50

If you receive a consideration

A consideration is something given to you in return for something you鈥檝e supplied. The consideration could be in money, goods, services or any combination of the three.

If the consideration you get is money, then the amount is VAT-inclusive and you need to calculate the VAT due at the correct rate for the supplies you鈥檝e made. If what you鈥檝e supplied is zero-rated, there鈥檚 no VAT due.

If the consideration you get isn鈥檛 money, or is part money and part something else, such as goods and services, you need to calculate the value of the part that isn鈥檛 money. The total amount (the non-monetary part plus any money) is VAT-inclusive and you need to calculate the VAT due according to the correct rate for the supplies you鈥檝e made.

If you make supplies to a business that you鈥檙e associated with, and you supply goods, services or anything else to them at prices below the open market value, you鈥檒l need to contact the VAT Helpline to discuss how to account for the VAT correctly.

If you don鈥檛 receive any consideration

If you give something away and receive nothing in return for it then VAT is due on the value of what you鈥檝e supplied. This is the money that would be payable to purchase the same goods - including age and condition - at the time of your supply.

If you can鈥檛 find out that value, then it鈥檒l be the money that would be payable to purchase similar goods - including age and condition - at the time of your supply. If you can鈥檛 work that out, then it will be the cost of producing the goods if they were made at that time.

If the goods are standard-rated the VAT due will be 20% of the value. Reduced-rated goods will be 5% of the value. You do the same calculation if you take something from the business for yourself and make no payment for it.