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 purpose of any business carried on or to be carried on by the person to whom they are supplied or by whom they are acquired or imported2.
Whether a business is carried on or to be carried on
The fact that a person carries on an activity (to use a neutral word) does not necessarily mean that tax is available for credit in respect of the goods or services obtained in order to carry it on. The activity must, in the words of VATA 1994, s 24(1), amount to a 'business' which is either 'carried on or to be carried on' or, in the words of Directive 2006/112/EC3, the person must be independently carrying out an 'economic activity' whatever the purpose or results of that activity.
Whether or not an activity amounts to a business is essentially a matter of fact to be
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