Partial Exemption

The VAT People has many years’ experience in offering advice and guidance to businesses and organisations in all sectors regarding VAT. If your organisation is failing to take advantage of the exemptions and reliefs available to you, it could be adding unnecessary costs to your operations.

Very often, businesses are unaware of the options available to them, so speaking to a professional is recommended. We want to ensure all of our clients have access to all of the help they need when it comes to VAT, and are best placed to offer advice.

Contact The VAT People by calling 0161 477 6600, or fill out an online enquiry form and we will be in touch at a time that is convenient for you.

What is partial exemption?

Partial exemption is an important aspect of VAT, and it is important that organisations understand the basics.

A VAT-registered business falls within the scope of partial exemption when it has both supplies of a taxable and an exempt nature. Output VAT cannot be charged on an exempt supply, and any input VAT incurred in making the exempt supply is usually unable to be recovered.

A partially exempt business carrying out non-business activities must normally determine the proportion of VAT incurred relating to these activities. It is essential that this VAT is disregarded before applying the partial exemption calculation because any input VAT - that which is attributed to non-business activities - cannot be recovered.

How do I calculate partial exemption?

Businesses that are partially exempt must use an approved method to calculate how much of its residual input task can be recovered. The standard method calculates recovery on the basis of use, based upon the proportion of taxable and exempt turnover in the business. For instance, if a business had £100,000 turnover in one three-month period, of which £80,000 relates to taxable expenditure, and £20,000 to exempt supplies, 80% of the residual input VAT would be recoverable.

How we can help

Businesses that are partially exempt have a lot to consider, which is why speaking to a professional about your circumstances is recommended. At The VAT People, we can help you with the following:

  • Ensuring that conditions of any VAT exemption sought are met, so that income can be accurately exempted where applicable

  • Examining VAT incurred on costs, and attributing correctly to establish whether ‘exempt input tax’ is above the de-minimis limit

  • Critically examining whether the standard method is the most beneficial for calculating the recoverable proportion of residual or overhead costs

Any partly exempt business should be proactive in the basics mentioned above, and in determining whether alternative methods of VAT recovery would improve their VAT position. However, we understand that this can be complicated, so are happy to step in to offer advice.

Speak to The VAT People

We have many years’ experience assisting businesses in maximising their VAT recovery, so feel free to contact us to discuss your circumstances. Call us on 0161 477 6600 or fill out an online enquiry form and we will get back to you.

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