Commentary

706 Partial exemption

Part V8 HMRC Notices
Part V8 HMRC Notices | Commentary

706 Partial exemption

Part V8 HMRC Notices | Commentary

706
Partial exemption

February 2021

This notice cancels and replaces Notice 706 (June 2011). Details of any changes to the previous version can be found in paragraph 1.2 of this notice.

This notice applies to supplies from 1 January 2021.

Temporary changes have been put in place to stop the spread of coronavirus (COVID-19).

We are reducing paper contact and ask you to submit your partial exemption request forms electronically. You can email your completed forms to PESMcovid19@hmrc.gov.uk.

Find out more about how to prepare your partial exemption special method request forms (https://www.gov.uk/guidance/partial-exemption-vat-notice-706#Appendix2).

This guidance will be updated when this change ends.

1 Overview

1.1 What this notice is about

A business is partly exempt if it makes, or intends to make, both taxable and exempt supplies and incurs tax on costs which relate to both.

If your business is partly exempt, you may not be able to recover all your input tax. You will have to use a partial exemption method to work out how much input tax you can recover. This notice explains—

  1.  

    •     what partial exemption is;

  2.  

    •     the partial exemption methods available to you;

  3.  

    •     the calculations and input tax adjustments you must make.

It also explains when you can recover all of your input tax even though part of it relates to exempt supplies. The impact of partial exemption on some specific business situations is also explained.

1.2 Changes to this notice

This notice has been updated following the end of the transition period on 31 December 2020.

1.3 The law

The primary UK VAT law concerned with the right to

To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to TolleyLibrary or register for a free trial