Partial Exemption on VAT
Are you a VAT-registered business that has supplies of both a taxable and exempt nature? If so, you may be adding unnecessary costs to your operations.
That’s where The VAT People’s specialist consultants can help. We are here to ensure you understand the often complicated conditions and obligations surrounding partial exemption, saving you time, cost and stress in the long run. It is vital to get this right so you can avoid paying any unnecessary penalties, which you can read more about here.
With more than 20 years of experience in the industry and vast knowledge of the inner workings of HMRC itself, you can rely on us to provide only the most accurate and effective advice.
For expert assistance with partial VAT exemption, contact us today by calling our helpline on 0333 3636 530, or fill out an online enquiry form to the side of this page and we will be in touch.
How we can help you
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.
What is partial exemption?
Partial exemption is an important aspect of VAT, and it is vital 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.
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