Input tax to be attributed under this head (referred to here as 'residual input tax') includes not only input tax attributable to the making of both taxable and exempt supplies1. It also includes input tax which is not specifically attributable to any supply (or is attributable to a non-business activity which is used to benefit the business2) but which is used for business purposes, eg general business overheads3.
For example, in Town & County Factors Ltd v HMRC, the Tribunal said:
'[Counsel for HMRC] makes a distinction between an input either having a direct and immediate link to particular supplies, or not having a direct and immediate link to any specific supply and thus being a general overhead…We consider that here there is no real distinction between the two in this case. The inputs have a direct and immediate link to all the supplies made from the LBO, and so they are a general overhead.'
The distinction between inputs attributable to both taxable and exempt supplies,
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