The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s VAT and customs regime. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit — overview guidance note.
This guidance note provides an overview of when input tax can be reclaimed and should be read in conjunction with the What is input tax and other notes in the ‘Claiming input tax’ subtopic.
See our interactive flowchart outlining the procedure for claiming input tax. Alternatively, for a static pdf version, see the Flowchart ― procedure for claiming input tax.
If a business meets the requirements outlined in the What is input tax guidance note and the goods and services purchased, acquired or imported by the business will be used in respect of its taxable business activities, then the VAT can be recovered in full.
There are, however, exceptions to the general rule and they are explained below.
Not all input tax incurred can be recovered. For example, certain items of input tax are specifically blocked by legislation or for goods sold using a ‘margin scheme’ any associated input tax is not recoverable. A summary of the items where all or part of the input tax cannot be claimed is below together with a link to the relevant guidance note that provides further information:
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‘Hold-over’ relief allows for the deferral of a gain that would otherwise arise in relation to a disposal. No capital gains tax (CGT) is due in respect of the disposal, but the base cost of the asset for the transferee for the purpose of a future disposal is reduced by an amount equal to the gain
The majority of state benefits (also called social security benefits) are managed by the Department of Work and Pensions (DWP) via the Jobcentre Plus.Some benefits are dependent on a national insurance contribution record (and different classes of national insurance provide different benefit
Expenditure of a capital nature is not allowed as a deduction when calculating trading profits. Expenditure of a revenue nature is allowable, provided there is no specific statutory rule prohibiting a deduction and the expenditure also satisfies the wholly and exclusively test. See the Wholly and
This guidance note provides an overview of what conditions need to be met before a business is entitled to treat VAT incurred as input tax. This note should be read in conjunction with the other notes in the ‘Claiming input tax’ subtopic. For a flowchart outlining the procedure for claiming input
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