The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
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 tax, see the Flowchart ― procedure for claiming input tax.
The term ‘input tax’ includes the following:
VAT incurred on goods and services that have been supplied to a taxable person
for transactions prior to 1 January 2021, VAT incurred on the acquisition of goods from another EU member state (acquisition tax)
VAT paid or payable on imported goods (import VAT)
VATA 1994, s 24(1); SI 1995/2518, reg 29(1)
The VAT must be used, or intended to be used, for the purposes of the business carried or intended to be carried on by the person receiving the supply.
VAT paid on the above only becomes ‘input tax’ if it meets the conditions outlined below.
The following conditions must be satisfied before a VAT registered business can reclaim input tax:
a supply must have been made
the supplier must have correctly charged VAT on the goods / services supplied to the recipient reclaiming the VAT
the supply must be made to a taxable person (ie a business that is VAT registered or required to be VAT registered)
the business must receive the goods / services for the purposes of their business activities
the recipient must be in receipt of a valid tax invoice or similar document
the input tax should be recovered in the period covering the tax point. However, in practice, HMRC will normally allow a business to recover VAT on a later VAT return subject to the four-year cap
the input tax must not be specifically disallowed or restricted by HMRC
These conditions are explained in more detail below.
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