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Section 24 of the Act provides that a taxable person can claim input tax in respect of goods or services used or to be used by him for the purpose of any business which he carries on.
Section 25 of the Act provides that a tax payer is entitled, at the end of each prescribed accounting period, to deduct input tax from output tax before rendering payment of the net amount of VAT to HMRC.
The definition of a motor car is contained in the Value Added Tax (Input Tax) Order 1992 (SI 1992/3222) ("the 1992 Order"), in which it is defined as follows:
Under paragraph 7(1), there is a general exclusion from the recovery of input tax in relation to purchases of motor cars unless the motor car is a "qualifying" motor car. Paragraph 7(2)(A) details what is required for a motor car to qualify on business purpose grounds.
In short, the thrust of the Upton case is that on the acquisition of a car the tax payer, if he is successfully to reclaim VAT, must not only establish the Purpose Test (ie exclusivity of business use) but, in addition, he must also have done something specific which makes clear that the vehicle has been put beyond or is not available for private use. That requires a very high onus of proof, but nonetheless it is the position of the current law.
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