Types of partial exemption special methods

Produced by Tolley
Types of partial exemption special methods

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

  • Types of partial exemption special methods
  • Sectorised methods
  • VAT groups and sectorisation
  • Overseas establishments and sectorisation
  • Allocation under a sectorised method
  • Outputs based allocation
  • Cost accounting allocation
  • Headcount allocation
  • Floor space allocation
  • Inputs based allocation
  • 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 looks at several of the most common ways that apartial exemption special method may operate in order to calculate the amount of VAT that can be recovered on costs that do not relate exclusively to either taxable or exempt activities. It should be read in conjunction with the Partial exemption special methods guidance note.

Sectorised methods

Sometimes it will make sense to split abusiness into separate parts as there is not asingle method which would fairly apportion residual input tax across all areas of the business. Each different part or ‘sector’ then calculates its own residual recovery rate in away that is appropriate for how residual costs are used in that sector. Such amethod is commonly known as a‘sectorised’ approach.

Each sector in asectorised method must reflect the following:

  1. the use made of the goods and services in that sector

  2. the structure of the business

  3. the type of activity undertaken by that sector

SI 1995/2518, reg 102(1A)(d)

HMRC states that asectorised method will only be appropriate when the additional burden of separate calculations (for both the business and HMRC) is offset by the additional accuracy the method provides.

HMRC’s internal guidance suggests that it will normally only accept asectorised method when abusiness has separate accounts based on established accounting principles for each sector. Separate accounts may mean completely separate accounts or asingle set of accounts with clearly allocated costs. In exceptional circumstances, it may accept asectorised approach even

Popular documents