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Changes to VAT partial exemption

Source: HM Revenue & Customs | | 01/09/2020

HMRC has updated its guidance on the VAT partial exemption treatment relevant to businesses who supply goods by way of hire purchase agreements. A policy paper entitled Revenue and Customs Brief 8 (2020): change to partial exemption VAT treatment was first published on 10 June 2020 and updated on 20 August 2020.

The policy paper was released following the Court of Justice of the European Union (CJEU) judgment C-153/17 Volkswagen Financial Services (UK) Ltd.

HMRC’s view is that a business supplying goods on hire purchase should be allowed input tax recovery on its overheads where the recovery is fair and reasonable. It does not follow that the recovery will simply be fifty-fifty.

In the policy paper, HMRC provides details of its recommended method for an output values-based method of apportionment of VAT incurred on overheads. The method set out is HMRC’s preferred industry method but is not compulsory and businesses can continue to apply any fair and reasonable partial exemption method already agreed with HMRC.

 

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McAllisters is a partnership trading from Paxton House, 11 Woodside Crescent, Glasgow providing accountancy and tax services and general business advice and is a member of ICAS (Registration No 0342) and an FCA exempt professional firm (No 301235). Its VAT number is 261 3019 94

McAllisters (Scotland) Ltd is a related business providing tax and business advisory services to McAllisters and its clients. McAllisters (Scotland) Ltd is registered in Scotland (Registration number SC146856). Its VAT number is 624 0564 62.

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