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HMRC internal manual

VAT Input Tax

VAT Input Tax basics: The Input Tax Order

A Treasury Order stops input tax from being claimed on some costs. These blocking orders apply even when the VAT meets the definitions and requirements of input tax.

The Value Added Tax (Input Tax) Order 1992 (Statutory Instrument 1992/3222) restricts input tax on the following categories of goods and services:

  • goods to be sold under the margin scheme for second hand goods;
  • goods and services to be sold as a package under the Tour Operators’ Margin Scheme;
  • goods or services to be used for the purpose of business entertainment;
  • the following items when installed in a zero-rated sale or long lease in buildings:

    • finished or prefabricated furniture, other than furniture designed to be fitted in kitchens;
    • materials for the construction of fitted furniture, other than kitchen furniture;
    • domestic electrical or gas appliances, other than those designed to provide space heating or water heating or both;
    • carpets or carpeting materials;
  • cars - unless purchased for one of the qualifying uses specified in the order.

The Input Tax Order also applies to goods that are not building materials. For further information please see VCONST.

The VAT (Tour Operators) Order 1987 also disallows input tax on goods or services acquired for resupply as part of package falling within the Tour Operators Margin Scheme. 

The expense of providing accommodation for company directors is not a cost incurred for business purposes. The VAT incurred does not meet the criteria of input tax and does not require a blocking order to stop deduction. See section 24(3) of the VAT Act 1994 at VIT11500.