V3.409 Duality of benefit

In principle, tax chargeable, paid or payable is input tax1 only if the goods or services concerned are used or to be used for the “purpose”2 of any business carried on or to be carried on by the taxable person concerned3.

It is necessary to distinguish a business “purpose” and a business “benefit”4. Thus, it is reasonable to suppose that a person's business will benefit if goods or services are purchased, acquired or imported for the purposes of that business. On the other hand, the fact that his business benefits from the goods or services does not necessarily mean that they were purchased, acquired or imported for the purposes of that business. There must be a real nexus between the matter in relation to which the expenditure has been incurred and the business itself. The fact that the business benefits from the expenditure is insufficient alone to create such a nexus and it follows, therefore, that benefit is not the test, or at least not the sole test, which determines whether expenditure has been incurred for the purposes of a business. Instead, the nexus must be directly referable to the nature of the business5. The distinction between purpose and benefit is important because the same goods or services can provide both a business benefit and a private benefit. For example, a sole trader may be prosecuted for an offence and the business concerned may instruct defending solicitors in connection with the criminal proceedings. If the sole trader

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