Callum Richards and Ian Carpenter explain how to handle partial exemption and give guidance on ‘direct and immediate link’
Partial exemption affects organisations which make both taxable and exempt supplies. It has always been a complex and highly litigious area within VAT. The relevant regulations are found within the VAT Regulations SI 1995/2518 regs 99–110.
Attribution
The first process of a partial exemption calculation is attribution. Attribution can be a very simple or complex exercise.
Regulation 101(2) requires that an organisation must identify the input tax which is:
directly attributable to taxable supplies ie wholly recoverable; and
directly attributable to exempt supplies ie non-recoverable (subject to the de minimis provisions).
Once this exercise has been carried out all other input tax which cannot be attributed to either taxable or exempt supplies is treated as nonattributable or ‘residual’.
Any input tax incurred which directly relates...
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Callum Richards and Ian Carpenter explain how to handle partial exemption and give guidance on ‘direct and immediate link’
Partial exemption affects organisations which make both taxable and exempt supplies. It has always been a complex and highly litigious area within VAT. The relevant regulations are found within the VAT Regulations SI 1995/2518 regs 99–110.
Attribution
The first process of a partial exemption calculation is attribution. Attribution can be a very simple or complex exercise.
Regulation 101(2) requires that an organisation must identify the input tax which is:
directly attributable to taxable supplies ie wholly recoverable; and
directly attributable to exempt supplies ie non-recoverable (subject to the de minimis provisions).
Once this exercise has been carried out all other input tax which cannot be attributed to either taxable or exempt supplies is treated as nonattributable or ‘residual’.
Any input tax incurred which directly relates...
If you or your firm subscribes to Taxjournal.com, please click the login box below:
If you do not subscribe but are a registered user, please enter your details in the following boxes:
