Input tax ― business, non-business and private use

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

This guidance note looks at issues around whether expenditure is used for business, private or other non-business purposes in the context of VAT recovery and input tax.

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 on input tax and business activities, see De Voil Indirect Tax Service V3.405A–V3.410.

Business, non-business and private use ― the basics

A general rule is that it is not possible to recover VAT on costs incurred on non-business activities. There are, however, a number of significant exceptions to this general rule that are summarised towards the end of this guidance note. Only VAT on costs which is used for business purposes can properly be said to be ‘input tax’. VAT which is incurred for either private or non-business purposes is not input tax and cannot be recovered, other than in exceptional circumstances.

HMRC policy regarding whether an activity is in the course or furtherance of a business has

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Input tax ― business, non-business and private use

Input tax ― business, non-business and private use