Simplifying VAT partial exemption

Following the consultation document issued by HMRC on simplifying the standard partial exemption method, it is likely that some simplifications will be introduced in the PBR. This will affect any taxpayer that makes both taxable and exempt supplies and uses the standard method to calculate how much input tax it may recover.

In our view, the most likely announcements will be:

a) the option to apply an in-year provisional VAT recovery rate
b) the opportunity to carry out an early annual adjustment
c) the ability to include certain overseas supplies in the standard method.

This would save businesses the cost of applying for a special method or carrying out a separate calculation to determine the recoverable VAT amount in relation to overseas supplies.