HMRC have updated the above notice to reflect their policy on accommodation and meals etc. provided to employees in hotels, inns and similar establishments where they are paid for from employee's salary. This reflects HMRC's position set out in Revenue & Customs Brief 28/11 as covered by Chartered Tax News.

HMRC's view is set out in paragraph 4.2 of the notice which states that if an employer supplies their employees with accommodation or food and drink in their establishment and the employees pay for it, the payments are treated as including VAT. Output VAT must therefore be accounted for on the relevant VAT return.

Where employees pay for meals and so on from their pay including under a salary sacrifice arrangement employers must account for VAT from 1 January 2012 on such supplies unless they are zero-rated. Subject to the normal rules, the employer can continue to recover the VAT incurred on related purchases.