Commentary

V7.343 Partial exemption—input tax apportionment

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.343 Partial exemption—input tax apportionment

Part V7 Tax planning | Commentary

V7.343 Partial exemption—input tax apportionment

In basic terms, a business that is partly exempt needs to analyse its purchases and attribute the input tax to the following three distinct categories:

  1.  

    •     costs that relate wholly to exempt supplies made by the business

  2.  

    •     costs that relate wholly to taxable supplies made by the business

  3.  

    •     costs that cannot be wholly attributed to either activity, eg general overheads of the business

There are three key phrases that emerge following the above analysis.

  1.  

    •     Exempt input tax – input tax attributable to exempt supplies. In most cases, this input tax will not be

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