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As of 31 August 2021, HMRC now have an accelerated online method for applying for a partial exemption special method. https://www.gov.uk/guidance/apply-for-a-partial-exemption-special-method

The webpage on the government.org website makes this look a very straight forward method as it requests the following information to be submitted online:

•            a proposal document setting out the method,

•            a worked example of the method

•            the latest annual adjustment calculation

•            a fair and reasonable statement and

•            supporting documents

HMRC also state that they will respond to applications within 30 days to either agree, ask for more information or reject the PESM. This response time is to be welcomed if this is achieved given that in some cases it can take over a year to find an officer to take ownership of dealing with a PESM submitted in writing to HMRC.

The obvious point with the accelerated method is that it is of benefit in ensuring that the method is submitted direct (presumably) to a team that is dedicated to partial exemption matters, but it does presume that the person making the submission understands what a PESM is and indeed how partial exemption works.

Given that Partial Exemption is one of the most complex areas of VAT it is possible that HMRC may receive applications from organisations that have a limited understanding of the subject. In addition, errors in general VAT understanding on the part of the organisation requesting the method are often identified at the time that a PESM is under review by HMRC. This can impact on the amount of mitigation given if the error has led to under declared VAT.

If you are an accountant or an organisation such as a charity, not for profit organisation, an education provider, financial service provider or property business, or indeed any other type of organisation that is partially exempt, it would be worth contacting our helpline for an initial free consultation to discuss your VAT position.

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