Which of the following is NOT an item on which input VAT cannot be recovered?

Input VAT recovery rules are established to define which expenditures can be reclaimed by businesses. In the context of this question, we are examining scenarios in which businesses may be unable to recover VAT.

Business entertaining, cars and their fuel, and the entertaining of non-UK customers typically fall under limitations for VAT reclamation because specific guidelines restrict input VAT on these items. For instance, VAT on business entertaining is generally not recoverable because it concerns the provision of hospitality, which is viewed as a private consumption expense rather than a business necessity.

Cars and their fuel present limitations as well; generally, input VAT on the purchase of cars isn’t recoverable unless the car is exclusively for business use. Similarly, the VAT on fuel used for personal journeys cannot be reclaimed.

Conversely, staff entertaining, which includes events for employees, tends to be distinguishable. Since it is aimed at promoting well-being and staff morale, input VAT on staff entertaining can typically be recovered as it is seen to have a direct connection to business operations and employee engagement. Thus, this makes it an item on which input VAT can be reclaimed, distinguishing it from the other options listed.

Therefore, while the first three options have restrictions regarding VAT recovery, staff entertaining does not, making it the