27/10/2026
The FTA has set new conditions for recovering VAT on employee benefits, effective on 1st October.
It applies to benefits provided free to employees under a contract or documented company policy, across six categories:
▪️ Staff transport: must cover commuting or work duties, exclude personal use and offer no cash alternative
▪️ Meals: must meet remote-location conditions (no suitable cooking facilities or easily accessible food outlets), with no cash alternative
▪️ Operational accommodation: must meet work requirements rather than form part of ordinary compensation, with no cash alternative
▪️ New recruits’ accommodation: temporary accommodation can qualify for up to 30 days, subject to suitability requirements
▪️ Phones and internet: must support work, with only insignificant incidental personal use, documented rules and monitoring
▪️ Parking: must relate to business duties, with an approval policy and payment records
The key shift is that a benefit written into a contract or staff handbook no longer establishes the right to recover VAT on its own. The arrangement must meet the conditions for its category.
What doesn’t change for employees: salaries, allowances, housing and transport stay as they are. What changes is the employer’s Tax treatment. Where VAT can’t be recovered, it becomes part of the company’s cost. Two things sit outside this decision. Benefits required by labour legislation and employee health insurance follow their own provisions.
A useful review starts with three questions: what benefit is provided, on what basis, and what evidence supports the claim?
Which of your staff benefits would pass that test today?
The smart move is a review. Look at what you provide, why you provide it, and what evidence backs the claim.
Need any help? That's where Legends Accounting comes in! Reach out to us to get started.
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