Value Added Tax

Input tax ― conditions for recovering VAT

Produced by Tolley
  • 09 May 2022 11:11

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

  • Input tax ― conditions for recovering VAT
  • Basics of VAT recovery
  • Whether input tax has been incurred
  • VAT has been incurred for business purposes
  • VAT has been properly charged
  • Business is the recipient of the supply
  • Whether the person is entitled to recover the input tax incurred
  • Costs used to make taxable supplies (or foreign and specified supplies)
  • Input tax that is specifically blocked
  • Necessary evidence held
  • More...

Input tax ― conditions for recovering VAT

This guidance note looks at the conditions that must be met in order for a business to recover VAT on costs.

For an overview of input tax more broadly, see the Input tax ― overview guidance note.

For in-depth commentary on the legislation and case law in this area, see De Voil Indirect Tax Service V3.401.

Basics of VAT recovery

For VAT to be recovered by a business (or other VAT registered person), it must:

  1. have incurred ‘input tax’ in the first place

  2. be entitled to recover that input tax

VATA 1994, ss 24, 26; VIT12100

Whether input tax has been incurred

For input tax to have been ‘incurred’ by a business, the following conditions must be satisfied:

  1. the VAT must have been incurred for business purposes

  2. the VAT must have been properly charged

  3. the business must be the recipient of the supply

VATA 1994, s 24(1); VIT10100

Input tax in this context can be VAT incurred on UK supplies of goods or services but it can also be import VAT (or VAT chargeable on acquisitions from EU member states in Northern Ireland).

VAT has been incurred for business purposes

Input tax refers to VAT incurred on costs which are used or to be used for business purposes. It is implicit in the term ‘input tax’ that the VAT is used for business purposes. Where costs are used wholly or partly for a non-business (or private) purpose, the VAT on these costs is only input tax to the extent that it is incurred

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