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advice on partial exemption vat

Electron VAT - Information on Partial Exemption and VAT

electron vat
Unfortunately, due to the sudden death of the Sole Proprietor this business will no longer continue. If you have any queries or outstanding issues please contact David Booth at his email address boothy55@yahoo.co.uk.

Partial exemption affects the amount of VAT that can be reclaimed back on the purchases made by a business.

HMRC have specialist Tax Avoidance Partial Exemption (TAPE) teams. They invest considerable time and investment in the members of these teams. To retain the expertise of these teams HMRC pay these people rates normally associated with management grades. I speak from personal experience.

Partial exemption is a priority area for HMRC because of its complexity. Legislation is always under review and businesses need to be aware of any changes.

Any business that makes both taxable and exempt supplies is legally obliged to carry out a partial exemption calculation, or at the very least perform a test to see if a calculation is required. Many businesses are unaware that they have exempt income; however in most cases it does affect their entitlement to recover VAT.

Land and property is the main sector affected by partial exemption because of the high values involved. Expenditure exceeding £250,000 means that the Capital Goods Scheme may apply and a calculation may have to be carried out for a period of up to 10 years.

Electron VAT Consultancy has an excellent record of properly understanding the legislation and thus minimising the impact of partial exemption on businesses. The default calculation is known as the “standard method”; however some businesses qualify to use a more tax efficient “special method”.

HMRC will often tell you it is too late to look at which partial exemption method to use. Due to technicalities this is not correct HMRC state that special methods cannot be back-dated but I have successfully argued that they can be retrospectively applied. Different words but the best outcome for my client!

For more information call us today on 01204 437443 or contact us online to arrange a consultation