Can my company reclaim VAT on personal costs

No. VAT is only input tax if the company bought the goods or services for the purpose of its business, so VAT on a director’s personal purchases, holidays or home improvements cannot be reclaimed even when the company pays and the invoice is in its name. HMRC specifically says directors cannot recover VAT on repairs and maintenance of their own home, apart from a genuine business share such as a room used as an office.

Tax investigation insurance from £108.75 a year (£9.06 a month).Pays up to £100,000 of your accountant's fees if HMRC opens an enquiry. No excess. Buy online in a few minutes.

See my price in 2 questions How the cover works Accountant? Offer cover to your clients or call 01795 841 310

What makes VAT reclaimable in the first place?

Section 24(1) of the VAT Act 1994 defines input tax as VAT on goods or services supplied to a taxable person and used or to be used for the purpose of any business carried on by them. HMRC’s manual at VIT20500 lists the conditions: there must be a supply to the person claiming, they must intend to use it for their business, and the expenditure must not be for private or other non business purposes.

VIT10200 makes the point that VAT does not become input tax simply because a VAT registered person incurred it. Among its typical examples of claims that fail the business purpose test are costs related to domestic accommodation, costs in pursuit of personal interests such as sport and leisure, and spending for the personal benefit of company directors, proprietors and partners.

Does paying through the company change anything?

No. A limited company is a separate person, but its purposes are not the same as the private purposes of the people running it. VIT10600 says that when the test is applied to a company you must work out both the business purposes of the company and the private purposes of its directors. It adds that the fact goods are owned by the company and shown on its balance sheet does not in itself mean they are used for the business, and gives yachts and aircraft as examples to look at closely.

There is also a supply rule. VIT13300 says only the person to whom a supply is made, for use in their taxable business, can make a valid input tax claim, regardless of who paid. An invoice addressed to the director personally is therefore not the company’s input tax, and an invoice addressed to the company still has to pass the business purpose test.

Worried about an HMRC check? Tax investigation insurance pays your accountant’s fees if HMRC opens an enquiry or compliance check. Solar Protect cover pays up to £100,000 with no excess. It never pays tax, interest or penalties.

From £108.75 a year (£9.06 a month) for individuals, £117.57 for sole traders and £207.50 for companies and partnerships, including IPT and the £20 admin fee.

See my price in 2 questions or call 01795 841 310.

★★★★★ Rated 4.9 out of 5 on Trustpilot from over 160 reviews

How does HMRC treat work on a director’s home?

VAT Notice 700 section 12.2.2 is explicit. Sole proprietors, partners and directors cannot recover VAT on expenses such as repair or maintenance connected with their domestic accommodation, even if the business owns the accommodation and bears the cost. Where the accommodation is partly used for business, for example a room used for meetings or as an office, part of the VAT can be reclaimed.

VIT41600 sets out the principle behind this: providing domestic accommodation is a personal rather than business responsibility, so in most cases VAT on it is not input tax. VAT on costs specifically identifiable to a room or area used for business, mainly fixtures, fittings and decorating, can be treated wholly as input tax. Costs that serve the whole property, such as fuel and power, general maintenance and security systems, are likely to be mixed use and need apportioning.

For buildings and other property there is an extra statutory rule. Section 24(5A) of the VAT Act 1994 says a relevant asset, which includes any interest in property, buildings, goods incorporated into a building, boats and aircraft, is not to be regarded as used for the business to the extent it is used for the private use of the taxable person or their staff. So a company cannot claim all the VAT on building work at a house its director lives in and then account for output tax on the private use; the private share is simply not input tax.

Employees are treated differently. Notice 700 section 12.2.1 allows a business that provides domestic accommodation for employees to treat the VAT as input tax, but section 12.2.2 removes that for directors.

What about staff perks given to a director?

There is a distinction between private spending and a genuine reward. VIT43700 says goods or services provided to reward or motivate staff are a legitimate business expense, so the VAT is input tax, but perks provided to specific individuals should generally carry an output tax charge to reflect private use. Its examples include free golf club membership that allows an employee private play. A director’s personal kitchen, holiday or family car is not a reward scheme; it is private expenditure and the VAT is not recoverable at all. Motoring has its own rules; see can a business reclaim VAT on a car.

Which costs are usually fine?

Some costs that benefit a director personally are still incurred for the business. Notice 700 section 12.1.2 allows a director to treat as input tax the VAT on meals taken away from their normal place of work on a business trip, though not meals that are not taken for business purposes. Section 12.1.3 allows VAT on hotel accommodation on a business trip. VIT13400 confirms that road fuel, subsistence and similar costs paid in full by the employer can be the employer’s input tax where they are genuinely for the business.

What does this look like in practice?

Illustration only. A company pays for work at its sole director’s house, all invoiced to the company:

Cost	VAT	Input tax?
New kitchen	£3,000	No, private domestic accommodation
Shelving and decoration in a room used only as the company office	£200	Yes, identifiable to the business area
Whole house alarm system	£300	Business share only, on a fair apportionment

The VAT question is only part of the picture. The same kitchen raises income tax, National Insurance and corporation tax questions; see what happens when a company pays a director’s bills and director’s loan accounts.

What if private VAT has already been claimed?

A claim for VAT that is not input tax is an error on the return and needs correcting; see correcting VAT errors. If HMRC asks about such items, for example in a VAT compliance check, VIT10200 says that where the link is not clear, it is up to the claimant to explain how the purchase plays a valid part in the business, and HMRC will usually record the explanation given.

What mistakes come up most often?

Treating anything invoiced to the company as automatically reclaimable.
Claiming in full on home improvements because the director works from home some of the time.
Claiming VAT on items bought in the director’s own name and later reimbursed.
Assuming a charge to the director’s loan account fixes the VAT; it deals with who bears the cost, not whether the VAT was input tax.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Related Accountapedia entries

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.