V3.468 Partial exemption—proposals for simplification

Part V3 Supplies, acquisitions and imports

V3.468 Partial exemption—proposals for simplification

V3.468 Partial exemption—proposals for simplification

At Spring Statement 2019, it was announced that the Government would launch a call for evidence on potential simplification and improvement of the VAT Partial Exemption (PE) regime to ensure that it is as simple and efficient for taxpayers as possible. This follows on from the findings of the 2017 Office of Tax Simplification (OTS) VAT review. In November 2017, the OTS published its report, 'Value Added Tax: Routes to Simplification' which made recommendations on the operation of various aspects of VAT, including PE and the CGS.

Partial exemption (PE) is an area of VAT which can often involve complex calculations in determining the recoverable input tax. As a result, businesses may incur significant time and administration costs on these calculations to be compliant with their tax obligations. Therefore, the Government recognises the need to review and simplify the PE tax regime to promote productivity and fair competition among businesses.

This call for evidence1 was published on 18 July 2019. It is an opportunity for businesses to share their views on PE and the CGS and its potential simplification. The call for evidence is split into three sections:


    •     process for applying PE Special Methods (PESMs), and the possible ways in which this might be improved to reduce burdens for taxpayers and HMRC alike


    •     exploring on how the current PE de minimis limit could be changed to aid

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