What is input VAT?
Input VAT is the VAT a VAT-registered business pays when it buys goods and services for the business, such as stock, equipment, professional fees or software. Subject to the VAT recovery rules, a business can generally reclaim input VAT by offsetting it against the output VAT it charges on sales when completing its VAT Return.
When can input VAT be reclaimed?
Input VAT is generally reclaimable where the purchase relates to the business's taxable supplies, a valid VAT invoice is held, and the expenditure is not on the categories HMRC blocks, such as most business entertaining and cars with significant private use. Where a purchase relates to both business and private use, only the business proportion is usually reclaimable.
Input VAT vs output VAT
Input VAT is the VAT a business pays on its own purchases, while output VAT is the VAT it charges customers on its sales. On a VAT Return, output VAT less input VAT generally determines whether the business pays HMRC or receives a refund.
Related terms: VAT, Output VAT, VAT Return, VAT Registration.
VAT rules depend on the nature of transactions and individual circumstances. This glossary provides general information and is not personalised tax advice.