VAT—partial exemption
Produced in partnership with Pinsent Masons
VAT—partial exemption

The following Tax guidance note Produced in partnership with Pinsent Masons provides comprehensive and up to date legal information covering:

  • VAT—partial exemption
  • Input tax recovery
  • Standard method of apportioning residual input tax—the partial exemption percentage
  • De minimis input tax
  • Annual adjustment
  • The standard method override
  • Special methods
  • Special method override
  • Non-business activities
  • Partly exempt groups

FORTHCOMING CHANGE relating to capital goods scheme and partial exemption: HMRC has launched a call for evidence to explore ways to improve the operation of partial exemption and the capital goods scheme following the findings of the 2017 Office of Tax Simplification VAT review. The consultation closed on 26 September 2019.

BREXIT: This document contains guidance on subjects impacted by the UK’s withdrawal from the EU. In particular on exit day (31 January 2020) regulation 4(1) and 4(2) of the Value Added Tax (Miscellaneous Amendments, Revocation and Transitional Provisions) (EU Exit) Regulations 2019, SI 2019/513 came into force. This regulation ensures that partial exemption special methods (PESMs) agreed before exit day in relation to specified supplies of financial services will continue now that the UK has left the EU and entered the implementation period by maintaining the pre-Brexit VAT recovery position for UK to UK supplies of financial services (exempt without refund) thereby removing the need for the method to be redrafted by the business and reapproved by HMRC. For further reading on Brexit and tax, see Practice Note: Brexit—UK tax consequences.

Businesses are partially exempt for VAT purposes if they make both taxable and exempt supplies. For a description of the types of supplies that are exempt from VAT, see Practice Note: Exemptions from VAT.

This Practice Note explains:

  1. when a partially exempt