Input tax Definition

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GLOSSARY

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What does Input tax mean?

vat chargeable under the UK or Isle of Man legislation which is incurred by a taxable person in respect of goods or services used (or to be used) for the purposes of a business carried on (or to be carried on) by him (Value Added Tax Act 1994, s 24(1)).

At the end of each prescribed period, a taxable person is entitled, in principle, to credit for so much of his input tax as is allowable by deducting the amount claimed on his VAT return. Input tax is allowable if it is attributed to specific supplies made by the taxable person in the course or furtherance of his business.

View the related checklists about Input tax

Issues to consider when drafting a settlement agreement—checklist (employer)

Issues to consider when drafting a settlement agreement—checklist (employer) The employer (and its advisers) should consider the following issues: Preparatory steps • Obtain from the employer: ◦ a copy of the departing employee's latest contract of employment/other relevant documents containing contractual terms (NB these may be in a staff handbook) ◦ details of the contractual benefits enjoyed by the employee ◦ relevant information regarding the employee's pension benefits ◦ relevant information regarding any shares/share options, etc held by the employee? Consider the Articles of Association/any relevant shareholder agreement, share scheme documentation, etc. See also Shares and share options below Status of negotiations • Will negotiations take place between the parties directly, or between their respective legal advisers? • How strong is the employer's negotiating position? How strong are the employee's claims or potential claims? In the case of dismissal, is there a fair reason and has the employer carried out a fair procedure? Is the employer in repudiatory breach? What is the employer prepared to offer initially, and is that...

Checklist—VAT points for charities

Checklist—VAT points for charities There are a number of points that charities need to consider when looking at their VAT status and how to organise their affairs in order to take advantage of the best VAT scenario available to them, ie to pay and/or incur as little or no VAT as possible. Input recovery To maximise this: • consider whether it is possible to bring some or more activities within the (zero rate) taxable regime from exempt or outside scope • ensure that the input tax is only reclaimed against taxable supplies—put in place procedures to ensure that input tax is not reclaimed on non-business or exempt supplies expenditure • ensure a choice of the best method to apportion input tax between business and non-business activities • consider splitting the organisational structure in two: ◦ non business activities with minimal taxable inputs carried out by one arm ◦ business activities with high taxable inputs carried on by the other arm (either a separate charity or trading subsidiary) Business What is...

When can a person recover VAT?

This Practice Note is about the circumstances in which a person who has incurred VAT on supplies it has received can recover that VAT from HMRC. It covers why VAT can be recovered, what can be recovered, the rules on the attribution of input tax to onward supplies, and the procedure for VAT recovery. It also looks at specific situations such as whether VAT can be recovered before a person is VAT registered and whether input VAT can be recovered when it has not been paid.Why can VAT be recovered?As explained in Practice Note: What is VAT?, under basic principles, VAT should be:•borne by the end consumer, and•recoverable by those in business at each production/retail stage, provided that their activities are themselves subject to VAT, as explained further in this Practice NoteIf a person were not able to recover VAT in this way:•VAT would not be being levied on consumption only, and•the amount of VAT charged along the production chain would exceed the rate of VAT in forceThe law in...

VAT tripartite supplies—third party consideration

UK VAT is charged on a supply of goods or services made (or treated as made) in the UK at a rate of, usually, 20% of the value of the supply. Although it is the person supplying the goods or services that is required to account to HMRC for the VAT, the cost of the VAT is usually passed on to the recipient of the supply. A VAT-registered recipient of a supply can therefore typically claim (or recover) the amount in respect of VAT that it has paid provided, broadly, that such supply is directly linked to its VATable business, ie it is a VAT cost incurred by the recipient in providing (or attributable to the making of) its own VATable supplies of goods or services.Normally, a supply of goods or services involves two parties—the supplier and the customer. However, it is also a common feature of commercial transactions for a party to pay an amount to a supplier in connection with a supply that is provided to a third...

Discover our 111 Practice Notes on Input tax

Share purchase agreement—pro-buyer—corporate seller—conditional—long form

Share purchase agreement—pro-buyer—corporate seller—conditional—long form This Agreement is made on [insert day and month] 20[insert year] Parties 1 [Insert name of selling corporate entity] incorporated in [England and Wales OR [insert country of incorporation] OR with registered number [insert company number] whose registered office is at [insert address] (the Seller); 2 [Insert name of purchasing corporate entity] incorporated in England and Wales OR [insert country of incorporation] OR with registered number [insert company number] whose registered office is at [insert address] (the Buyer), and 3 [Insert name of guarantor entity] incorporated in England and Wales OR [insert country of incorporation]] with registered number [insert company number] whose registered office is at [insert address] (the Guarantor) [(each of the Seller, the Buyer and the Guarantor being a Party and together the Seller, the Buyer and the Guarantor are the Parties).] Background (A) The Company (as defined below) is a private company limited by shares and is incorporated in [England and...

Share purchase agreement—pro-buyer—individual sellers—conditional—long form

Share purchase agreement—pro-buyer—individual sellers—conditional—long form This Agreement is made on [insert day and month] 20[insert year] Parties 1 The several persons whose names and addresses are set out in Schedule 1 (together the Sellers), and 2 [Insert name of purchasing corporate entity] incorporated in [England and Wales OR [Insert country of incorporation]] with registered number [insert company number] whose registered office is at [insert address] (the Buyer), [(each of the Sellers and the Buyer being a Party and together the Sellers and the Buyer are the Parties).] Background (A) The Company (as defined below) is a private company limited by shares and is incorporated in[ England and Wales OR [insert country of incorporation]]. Details of the Company are set out in Schedule 2, Part A. (B) The Sellers are the legal and beneficial owners of the Sale Shares (as defined below), being in aggregate the entire allotted and issued share capital of the Company. (C) The Sellers have agreed to sell and the...

Dive into our 14 Precedents related to Input tax

Is it possible for a pension scheme to pay costs net of VAT, with the company paying the VAT and recovering it from HMRC?

Is it possible for a pension scheme to pay costs net of VAT, with the company paying the VAT and recovering it from HMRC? As a general rule a value added tax (VAT) registered business: • must charge VAT on supplies of its goods and services (output VAT), if those supplies are standard-rated for VAT purposes, and • may recover VAT it has paid on business related goods or services (input VAT) subject to meeting certain conditions VAT invoices must be made out to the person who is the recipient of the supply. Subject to this it is permissible for a supplier to issue a VAT-only invoice and for the invoice to show that it is ‘payable by’ a third party. It is also possible for the recipient of a supply to pay the whole (VAT-inclusive) amount and recharge the VAT element to a third party. In both cases, it will be necessary to consider the implications for recovery of the input tax concerned. The conditions that...

Does a non-UK entity need to have a UK bank account in order to register for VAT in the UK and recover input tax?

Does a non-UK entity need to have a UK bank account in order to register for VAT in the UK and recover input tax? We are not aware that there is a legal obligation to have a UK bank account in order to register for value added tax (VAT). HMRC forms for registering for VAT support the conclusion that it is not necessary to have a UK bank account, but also make it clear that HMRC would prefer that businesses did have a UK bank account. For example the VAT1A which is used for applying to register for VAT businesses that are distance selling into the UK contains the

See the 19 Q&As about Input tax

Tax weekly highlights—5 December 2024

This week's edition of Tax weekly highlights includes: (1) key announcements from the Scottish government’s 2025–26 Budget, (2) News Analyses of the FTT’s decisions in L v HMRC, Stage One Creative Services and Rupert Grint, (3) HMRC’s latest Stakeholder Digest and (4) the European Commission closing state aid investigations into Amazon, Fiat and Starbucks.

Tax weekly highlights—7 November 2024

This week's edition of Tax weekly highlights includes: (1) the publication of Finance Bill 2024–25, (2) a reminder of our full Autumn Budget 2024 coverage and related news, (3) case analysis of the FTT’s decision in Collins Construction Ltd concerning the restriction on subsidised expenditure under the pre-April 2024 R&D tax relief rules for SMEs, and (4) analysis of the FTT’s decision in Murphy concerning an SDLT sub-sale avoidance scheme.

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