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Standard method |
Under the standard method, this
percentage is calculated as the value of taxable supplies over
total supplies ( RoundingThe recovery percentages calculated under the standard method must be rounded up to the next whole number unless you incur more than £400,000 of residual input tax each month on average in which case you must round to 2 decimal places. Note that rounding up does not apply in certain circumstances for ‘foreign’ and ‘specified’ supplies. The de minimis ruleWhere exempt input tax is deemed as insignificant, all input tax suffered is deemed to be attributable to taxable supplies and so is fully recoverable. For this treatment to apply, the total value of exempt input tax must not:
Total value of exempt input tax is input tax directly attributable to exempt supplies plus the proportion of residual input tax that is attributable to exempt supplies. A simplified test was introduced from 1 April 2010 to save certain businesses the need to carry out a full partial exemption calculation each quarter to confirm that they are de minimis. For this treatment to apply, the following conditions must be met:
Where in a VAT period a business passes the simplified test, it can treat itself as de minimis and provisionally recover input tax relating to exempt supplies. Businesses must still review its de minimis status at the year-end as before and account for any over or under recovery of input tax as part of its annual adjustment. Note that for group registrations, the above limit applies to the group as a whole. |
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