Translation glossary: economics

BIM31520 - VAT: input tax
In general, a registered trader who makes taxable supplies (standard and zero rated) can reclaim the VAT incurred on purchases of goods and services that are to be used for the purposes of the business. This is known as input tax. However, if the trader also makes exempt supplies the VAT incurred on purchases may not be recoverable in full (see BIM31540). A trader whose taxable turnover does not exceed the specified registration limit is unable to reclaim any VAT paid on purchases unless the choice is made to register for VAT (see BIM31515).

An important feature of the input tax for Income Tax, etc. purposes is that it may include VAT on what we regard as capital expenditure, for example, VAT on the expenditure on plant used in producing the goods the trader supplies. The trader can reclaim all the VAT incurred on that plant at the time of purchase, that is, the claim is not spread over the anticipated life of the plant. Similarly the `supplies' on which the trader has to account for VAT, although normally corresponding to his trading sales, etc., may include disposals of capital assets of the business.

Translation glossary: economics

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