Partial exemption special methods

Produced by Tolley
Partial exemption special methods

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

  • Partial exemption special methods
  • What is a special method?
  • How do I get approval for a special method?
  • Making a declaration
  • Refusing approval
  • De facto approval and old special methods
  • How do I devise a partial exemption special method?
  • What a special method must cover
  • Percentage rounding
  • Incidental and distortive supplies
  • 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 use of partial exemption special methods in order to calculate the amount of recoverable residual input tax.

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 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.

Since 1 January 2011, it has been possible to use a combined special method which deals not only with partial exemption but also with apportionment of VAT incurred in relation to business and non-business activities.

The following provide examples of when a business may need to use a special method:

  1. Example 1

  2. Example 2

  3. Example 3

  4. Example 4

How do I get approval for a special method?

Businesses wishing to start using a special partial exemption method, or change their existing partial exemption method, must obtain approval from HMRC. The business should contact HMRC providing a full explanation of how the proposed method will operate. The Checklist ― partial exemption special method application provides further guidance on what needs to be contained in

Popular documents