Chapter 4: Input and Output Tax

Question 1

What are some examples of irrecoverable input VAT?

Answer 1

• entertaining or hospitality (except for employees or overseas customers)
• purchase of cars (unless solely used for business e.g. taxis)

Question 2

What is the rule for reclaiming VAT on taxable and/or exempt supplies?

Answer 2

• If a purchase is used solely for taxable supplies, the VAT can be fully reclaimed (e.g advertising)
• If a purchase is used solely for exempt supplies, no VAT can be reclaimed (e.g insurance)
• If a purchase is used for both, the VAT is apportioned based on how much it is used by each (e.g photocopier, heat and light)

Question 3

What is residual tax?

Answer 3

Input tax that cannot be directly attributed to making either taxable or exempt supplies