Chapter 20 - Input Tax - When to Recover

Question 1

Introduction

Answer 1

Generally, when input VAT is incurred by a taxable person, it’s available for credit. It is deducted from output tax and hence recovered from HMRC

Question 2

Conditions

Answer 2

There are conditions to meet before input tax can be reclaimed:

• a supply of goods or services is being made
• the supply must be made to the taxable person who is a taxable person at the time the supply is made
• the supply of good or services must have been made for a business purpose
• the claimant must hold the required evidence of purchase
• input tax on supply must have been correctly charged
• the goods or services being supplied must have a direct and immediate link with taxable supplies made by the business
• input tax must not be specifically blocked from credit

Question 3

Supply for Business Purposes

Answer 3

If a supply is purchased which is used only partly for business purposes, the input tax is apportioned and only the business portion is credited

Question 4

Claimant Holds Required Evidence

Answer 4

Required evidence is usually a tax invoice. HMRC can accept other forms of evidence.

Question 5

Blocked Input Tax

Answer 5

Input tax on business entertaining and motor cars is specifically blocked from recovery

Question 6

Block Input Tax Notes

Answer 6

Input tax on STAFF entertaining is recoverable

Input tax on company cars that will have no private use is recoverable, as are repair costs