"Qualifying activities" are defined to include: transport outside the State of passengers and accompanying baggage; supplies of goods deemed to have taken place in another Member State where the supplier is VAT-registered there; services specified in paragraphs 6(1), 7(1) or 8 of Schedule 1 supplied outside the Community or directly in connection with export; and supplies of goods or services outside the State which would be taxable if made in the State. A "qualifying vehicle" is a motor vehicle first registered for vehicle registration tax in specified periods with CO2 emissions below stated thresholds.

Subject to subsection (3), subsection (2) permits an accountable person to deduct input tax in computing tax payable for a taxable period where goods or services are used for taxable supplies or qualifying activities. Deductible items include tax charged by other accountable persons, import VAT, tax on intra‑Community acquisitions subject to regulations, 20% of VAT on qualifying vehicles used at least 60% for business, VAT on energy supplies, VAT on installed or assembled goods, various reverse‑charge liabilities under section 16 and related provisions, tax on immovable goods, supplies treated as made under section 19 or 27, flat‑rate additions, investment gold, and tax under section 92. Subsection (3) lists persons to whom subsection (2) does not apply. Subsection (4) permits election treatment for stock‑in‑trade on becoming an accountable person; subsection (5) provides for refund of excess deductions under section 99(1) subject to section 100.