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Introduction to input tax

It is often incorrectly assumed that all VAT incurred on costs is ‘input tax’. In fact, for input tax to have been incurred by a VAT registered business, the following conditions must all 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

As a general rule, VAT on costs must be input tax for it to be recovered. However, it does not follow that input can always be recovered. Certain conditions must be met for a VAT registered business to be entitled to recover input tax. For example, the business has to hold evidence, normally in the form of a VAT invoice.

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