Input tax is defined as VAT incurred on goods or services which are used or to be used for the purposes of the business (VATA 1994, s. 24(1) and Directive 2006/112, art. 168). Thus, VAT incurred on expenditure which is not for the purposes of the business is not input tax and is not recoverable.

Whether goods or services are obtained for the purposes of the businesses is sometimes open to doubt. The matter has been considered in many cases.

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