The most asked question we hear from businesses is why they can’t recover VAT on costs they incur. In many cases the reason is obvious and is likely to be because the VAT rules specifically don’t allow VAT recovery – an example of this would be VAT incurred on business entertainment which is blocked. Another reason is that the business does not hold the correct evidence to recover the VAT. Where a business does not have a valid VAT invoice it is unlikely that the tax authorities (in the UK this is HM Revenue & Customs or “HMRC”) would allow VAT recovery.
Source: way2vat.com
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