The facts as I understand them are you have to be making "taxable supplies" in order to reclaim input taxes. e.g. schools cannot reclaim VAT because they do not charge VAT on their services - likewise Banks. However if you charge VAT then you can claim it on the input tax.
Don't believe me though as I'm not a VAT lawyer. I have however run 101 companies and this is what the accountants tell me. I don't believe them either as they are not VAT lawyers - they do know more than me - and (it seems) more than an ex-Inland revenue empoyee.
