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Two important principles of claiming input tax are considered.
KEY POINTS
- Are expenses incurred to make “taxable sales” of a business?
- Does the expense belong to the VAT-registered business?
- Is the supply to the business or to another “natural person”?
- The expense must have a “direct and immediate link”with an output and be a “cost component”.
- The “economic reality” of a transaction always supersedes invoicing issues.
We should never be afraid to go “back to basics” in the world of tax. It is a useful exercise to challenge our thinking on the basic principles of our chosen subject. Are these the same in practice as when we passed our tax exams back in 1985?
A challenge that can often arise in VAT particularly in the global world we now inhabit where business and private activities overlap ...
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