Value Added Tax

Exemption ― supplies of goods where input tax cannot be recovered

Produced by Tolley
  • 22 Dec 2021 18:44

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Exemption ― supplies of goods where input tax cannot be recovered
  • VAT treatment
  • What counts as input tax?
  • What is non-deductible input tax?

Exemption ― supplies of goods where input tax cannot be recovered

This guidance note provides an overview of the VAT treatment of sales of goods on whose purchase input tax was non-deductible.

VAT treatment

The supply of goods in relation to which input tax was non-deductible is exempt.

This provision came into effect from 1 March 2000 as a result of an CJEU ruling in EC Commission v Italian Republic.

The relevant legislation (see above link) states that a supply of goods in relation to which the following conditions are satisfied, is exempt:

  1. a)

    the person making the supply (‘the relevant supplier’), or any predecessor of his (ie where there has been a prior transfer of a going concern, or more than one such transfer), has incurred input tax on the goods used for the supply

  2. b)

    the only such input tax is non-deductible input tax, and

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