As discussed at ¶19-020 s. 24(1) of VATA 1994, lays down the principle that in order to be recoverable as input tax VAT must have been incurred on expenditure which is ‘used or to be used for the purpose of the business’. When applying this principle a distinction must be drawn between expenditure which is ‘for the purpose’ of the business and expenditure which merely benefits the business. While VAT incurred on the former is recoverable as input tax (subject to the normal rules), VAT incurred on the latter cannot be claimed as input tax.

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