Partial exemption overview

Produced by Tolley
Partial exemption overview

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

  • Partial exemption overview
  • What is partial exemption?
  • Claiming late input VAT under partial exemption
  • Partly exempt group registrations
  • Divisional VAT registrations and partial exemption
  • Transfer of a business as a going concern and partial exemption
  • Transferor
  • Transferee
  • Foreign and specified supplies
  • Supplies of overseas branches
  • More...

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s VAT and customs regime. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit — overview guidance note.

This guidance note provides an overview of the main rules relating to partial exemption. Partial exemption calculations are covered in the following guidance notes:

  1. Partial exemption standard method

  2. Partial exemption special methods

There are specific terms used in connection with exempt supplies and partial exemption. A glossary of the commonly used terms can be found in the Partial exemption glossary guidance note.

Please note that partial exemption does not deal with private supplies. Businesses cannot recover VAT incurred on costs associated private activities and any input tax should normally be apportioned between business and private activities before a partial exemption calculation is undertaken. However, since January 2011, a business can agree a combined partial exemption method that covers non-business and exempt activities with HMRC.

For an overview of the main partial exemption rules, see the Flowchart ― partial exemption.

HMRC’s published guidance on partial exemption can be found in Notice 706 and their Partial Exemption manuals. HMRC also publishes a Partial exemption toolkit which could provide useful guidance for businesses and agents dealing with partial exemption issues.

What is partial exemption?

A business that makes both taxable and exempt supplies is partly exempt.

For these purposes, taxable supplies include the following:

  1. supplies of goods and services liable to VAT at the standard, reduced or zero rate of VAT

  2. supplies to overseas customers that would be liable to VAT if they had been made in the UK

  3. certain exempt supplies that have been made to a recipient resident outside of the EU. These are

Popular documents