Input tax excluded from credit meaning

input tax excluded from credit describes input VAT that a business cannot reclaim on its VAT return because legislation blocks recovery for particular goods or services. In UK practice, this flows from the Value Added Tax Act 1994, section 25(7), which permits exclusions and limits, with the detailed “blocked” categories set mainly by secondary legislation (for example, the Value Added Tax (Input Tax) Order 1992) and attribution rules in the VAT Regulations 1995. Typical UK examples include VAT on business entertainment of non‑employees and on the purchase of most passenger motor cars (subject to narrowly defined exceptions). In addition, input tax attributable to exempt supplies or to non‑business use is not recoverable under the attribution and partial exemption rules. The concept is commonly referred to as “blocked input tax”. Across England & Wales, Scotland and Northern Ireland, usage is consistent under the UK VAT system. In Ireland, a broadly similar approach applies under the VAT Consolidation Act 2010, with restrictions typically covering entertainment, most passenger motor vehicles and (more restrictively than in the UK) petrol, alongside attribution limits for exempt and non‑business use. Practically, identifying excluded input tax is key to VAT recovery, partial exemption calculations and compliance.