What is Partial Exemption?
VAT exemption means that your business only sells or provides VAT exempt goods or services. These exempt sales range from insurance to health services to education. VAT is not chargeable on these sales but is also not recoverable on related expenditure.
It’s important to understand that exempt sales are not the same as zero-rated sales as those are still considered VATable and must be included in your taxable sales reports. Examples of zero-rated sales include books, foods, and certain construction services. VAT is not chargeable on these sales but is recoverable on related expenditure.
Partial Exemption is the term used to describe a business that has a mixture of exempt and VATable income and so can usually only recover part of the VAT it incurs on expenses.
How we can help you with Partial Exemption
Partial exemption can often cause complexity for businesses as they try to ensure they recover the right amount of input VAT. We can carry out quarterly calculations for you, or carry out an annual review and prepare the annual adjustment. We can also advise on special methods and negotiate these with HMRC.
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Depending on budget, the review can focus on one area, such as overseas sales, or posting of expenses, or can look at the business as a whole.