Thats best but just to explain a bit more. Say you have a business which runs from one premises, insurance broker and auctioneer say. The insurance business is VAT exempt, the auctioneering business is VATable. There is one ESB bill, one phone bill, one accountants bill , computers bought all of which have VAT on but all of which are shared by the 2 parts of the business. You can't claim the VAT on all the bills against the VAT on the auctioneering sales. You have to arrive at an equitable apportionment as between the usage to each part of the business and claim the VAT on that portion of the expenses only that relates to the VATable sales.