Bose, not sure you are quite right on this. Yes, you cannot form a company and claim VAT if its for the purposes of enabling your personal recreational flying.
But I think that a non-aviation business can operate an aircraft for the purpose of transportation of their staff (which may include the pilot flying), or goods, on their business. I'm sure very many do, including corporate jets!
I operated an R22 for several years for the sole purpose of visiting clients on my non-aviation business, and I'm sure that my reclaim of VAT, as well as the operating costs against company income, was perfectly legal.
I never had a HM revenue query on this, although it was transparent in filed accounts, with an aircraft explicitly in the balance sheet, and depreciation of it against profits.
Mike.
Last edited by MikeJ; 27th May 2007 at 18:39.