V3.460 Attribution of input tax

Partial exemption – introduction

V3.460 Attribution of input tax


Once the extent to which the amount of VAT incurred by a person can be regarded as input tax is established, and any amounts of input tax which are excluded from credit1 have been identified, it is then necessary to determine the extent to which that input tax is recoverable.

A taxable person is entitled, at the end of any prescribed accounting period, to credit for so much of his input tax for that period in question as is allowable. He may deduct the amount of that credit from any output tax that is due from him2.

European provisions

Directive 2006/112/EC3 sets out the principles underpinning recovery of VAT, stating that only that proportion of VAT which is attributable to transactions falling within arts 168 and 169 is recoverable. The means of attribution is set out in arts 174 and 175 (formerly Directive 77/388/EEC art 19); member states may, however, use other means of attribution4.

UK legislation

Input tax is allowable to the extent that it is attributable to the following supplies made by the taxable person in the course or furtherance of his business5


    (1)     taxable supplies;


    (2)     supplies outside the UK which would be taxable supplies if made in the UK;


    (3)     such other supplies outside the UK and such exempt supplies as the Treasury may by order specify, namely6


      (a)     services within the following descriptions which are exempt from tax or would have been exempt if made in

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