The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
This note provides an overview of the rules regarding partial exemption annual adjustments or longer period adjustments. This note should be read in conjunction with the Partial exemption standard method and Partial exemption special methods guidance notes.
A business will normally be required to undertake a partial exemption calculation each VAT return period in order to provisionally determine the amount of recoverable input tax incurred during that period. At the end of the tax year (or other longer period), the business will be required to redo the partial exemption calculation using the figures for the whole tax year / longer period in order to calculate the actual amount of recoverable input tax for the whole period. The annual adjustment also allows the business to:
Under normal circumstances, the annual adjustment covers a business’s tax year but in certain instances, it will cover a different longer period which is shorter than 12 months.
A tax year is a 12-month period and normally ends on the 31 March, 30 April or 31 May depending on the VAT return periods allocated to the business. For businesses that render monthly VAT returns, their tax year ends on the 31 March.
Many businesses elect to have a VAT return stagger that matches their financial year-end. HMRC will normally agree to
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