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UK VAT - Partial exemption

  • VAT
  • Standard
  • Managing Compliance & Risk

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A guide to input tax recovery for UK VAT registered businesses that make, or intend to make, both taxable and exempt supplies for VAT purposes and incur VAT on costs which relate to both

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UK VAT - Partial exemption

A business is considered partly exempt for UK VAT purposes if it makes - or intends to make - both taxable and exempt supplies and incurs VAT on costs (input tax) which relate to both.

A partly exempt business may not be able to recover all its input tax. To determine what and how much input tax can be recovered, a step by step process of calculations and adjustments must be worked through. This includes choosing and using a partial exemption method to work out how much residual input tax you can recover.

If you have a partly exempt business, our guide outlines:

  • what partial exemption is
  • the partial exemption methods available, and
  • the calculations and input tax adjustments you must make.

It also explains the impact of partial exemption in two special case situations, namely change of use and in relation to capital items covered by the capital goods scheme.

This guide is one of a series of guides covering UK VAT. Other guides in our series include:

UK VAT - A basic guide

UK VAT - Land and property

UK VAT - Motor cars and employee expenses

UK VAT - Business entertainment and miscellaneous expenses

UK VAT - Transfer of a going concern (TOGC)

UK VAT - Bad debt relief (BDR)

 

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