Partial exemption overview

Input VAT incurred by a VAT-registered business may only be recovered where the expense can be attributed to taxable supplies. Input VAT that relates to exempt supplies is not recoverable. Where a business makes both taxable and exempt supplies, it is referred to as being partially exempt and an apportionment calculation is required in order to determine how much input VAT may be recovered.

There are two approaches to this calculation that can be taken: the standard method and special methods. In both cases, the first stage will be to determine whether any input VAT is directly attributable to either taxable or exempt supplies in which case input VAT will be either recoverable or irrecoverable in full. Input VAT remaining after this direct attribution is referred to as residual, and the next stage is then to determine the percentage of this residual input VAT amount that may be recovered.

As VAT groups are treated as a single taxable person trading through its representative member, it will have only one partial exemption method for the whole group.

SECTION CONTENTS

PREV

NEXT

BACK TO MAIN