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In principle, tax chargeable, paid or payable is input tax¹ only if the goods or services concerned are used or to be used 'for the purposes of any business' carried on or to be carried on by the taxable person concerned². The UK legislation specifies that certain goods and services are³ or are not⁴ purchased, acquired or imported for a business purpose. In other cases, it is necessary to ascertain the person's intention in making the purchase, acquisition or importation concerned in order to determine whether the goods or services are used or to be used for a business purpose.

Where there is an obvious and clear association between the expenditure incurred and business carried on, express evidence of the trader's intention may not be necessary. Where this is not the case, however, the test to be applied has been set out by Stuart-Smith J in the following terms⁵:

'The test is were the goods or services which were supplied to the taxpayer used or to be used for the purpose of