This guidance note provides an overview of the use of partial exemption special methods in order to calculate the amount of recoverable input tax.
For an overview of partial exemption more broadly, see the Partial exemption ― overview guidance note.
For in depth commentary on the legislation and case law, see De Voil Indirect Tax Service V3.462.
What is a special method?
Where a business does not believe that the standard method described in the Partial exemption standard method guidance note is a fair way for apportioning its input tax, it may seek to agree a fairer special method with HMRC. A special method is any other method than the standard method.
A special method needs to be approved in writing by HMRC before it can be used by a partly exempt business to calculate the amount of recoverable input tax. Special methods can be unique to a business and designed to deal with its particular type of activity or set of activities.
It is possible to use a combined special method which
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