One of the main principles of VAT is that input tax can only be reclaimed on expenses that relate to 'taxable supplies made by a business'.
In effect, this means that if a business owner or employee incurs motoring costs on a visit to a client, and the business is VAT registered and makes taxable supplies, then any VAT incurred on the journey can be recovered. If, however, the journey is to watch a football match, then this expenditure cannot be reclaimed for VAT purposes because it is now a private or non-business expense.
In reality, the reason why the VAT rules can be complicated in this area is because of the practical difficulties of making input tax claims. For example, in the situation above, if the business owner fills up his car with petrol, he does not know at this stage (unless he is a meticulous planner who knows his precise travel plans for the next seven days!) how much of this petrol will be used for business purposes (ie input tax reclaimable) and how much will be for private purposes (ie input tax not reclaimable).
Note – The rules explained and examples provided in this section are with reference to situations where the business is not affected by the partial exemption rules.