Partial exemption de minimis limit

By Tolley

The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Partial exemption de minimis limit
  • Partial exemption de minimis limit
  • Main de minimis test
  • Simplified de minimis tests
  • Annual adjustment and the de minimis limit
  • Annual de minimis test
  • Standard method override and the de minimis limit
  • Capital goods scheme & the de minimis limit

This guidance note provides an overview of the partial exemption de minimis rules. This note should be read in conjunction with the Partial exemption overview guidance note.

De Voil V7.347 (subscription sensitive); PE24500; 2006/112/EC , Article 173(2)(e); SI 1995/2518, reg 106; HMRC Notice 706 
Partial exemption de minimis limit

If abusiness incurs an insignificant amount of input tax which is associated with exempt supplies (exempt input tax), it may be possible for all of the VAT to be recovered. However, please note that if abusiness has elected to use the ‘combined’ partial exemption method, then it cannot use the de minimis limit to recover VAT.

The de minimis test rules explained below can only be applied to exempt input tax. If the business incurs VAT on non-business or private expenses, this VAT cannot normally be recovered. See the Input tax ― business and non-business or private use guidance note for more information.

Main de minimis test

Since April 2010, there have been two simplified de minimis tests which supplement the main test. These are explained below.

De Voil V3.465 (subscription sensitive); SI 1995/2518, reg 106

See also the Flowchart ― De minimis tests for an illustration of how the tests are to be applied.

Under the main test, abusiness can recover all of the VAT incurred if the total value of the exempt input tax is no more than:

  • £625 per month on average
  • 50% of the total input tax in the relevant period

The total value of the exempt input tax must include the following:

  • input tax

More on Partial exemption: