V3.465 Input tax treated as attributable to taxable supplies—the 'de minimis' limits)
Directive 2006/112/EC, art 173(2)(e)1 provided (as at IP completion day) that where the amount of input tax which is not deductible by a taxable person is insignificant, member states may allow it to be treated as nil, ie it may be recovered in full.
UK legislation re-enacts this by providing that such input tax ('relevant input tax') may be attributable to taxable supplies. The limits applicable to such input tax are generally known as the 'de minimis' limits2.
From 1 April 2010, the de minimis test is supplemented3 by two further tests, which are intended to simplify the application of the de minimis limits. Therefore there are in total three tests which may be applied, described below as 'the simplified de minimis test', 'the main de minimis test', and 'the annual test'.
The simplified de minimis test4
For periods starting on or after 1 April 2010, taxable persons may treat all their input tax in a period (or longer period, as appropriate) as attributable to taxable supplies if, in that period:
(a) their total input tax, less any input tax directly attributable to taxable supplies5, does not amount to more than £625 per month on average, and
(b) the value of their exempt supplies6 does not exceed one half of the value of all their supplies7
In this context, the term 'taxable supplies' includes supplies of a description falling within SI 1995/2518, reg 103. The attribution of input tax to taxable