Irrecoverable VAT refers to Value-Added Tax that cannot be recovered because the buyer purchased items for a non-business related activity. Someone who buys goods for personal use cannot recover VAT. Charities cannot recover VAT on many of their purchases, according to Saffery.com.
Irrecoverable VAT poses a problem for charities and voluntary associations, according to the National Council for Voluntary Organisations (NCVO). It can represent a considerable added cost to their operations.
Examples of Purchases
An aid association that buys office telephones pays the cost of the phones plus VAT. The association depends on donations for its purchases and cannot recover the VAT, according to Saffery.com. Neither can the association recover VAT on supplies that it buys to provide emergency aid.
Sometimes a buyer uses goods for business as well as non-business purposes. In such cases the buyer must calculate what portion is used for each to determine recoverable and irrecoverable VAT, according to Saffery.com.
Lexa W. Lee is a New Orleans-based writer with more than 20 years of experience. She has contributed to "Central Nervous System News" and the "Journal of Naturopathic Medicine," as well as several online publications. Lee holds a Bachelor of Science in biology from Reed College, a naturopathic medical degree from the National College of Naturopathic Medicine and served as a postdoctoral researcher in immunology.