HMRC and the Association of British Insurers have together published new, detailed guidance to help insurers gain approval for ‘fair and reasonable’ partial exemption special methods. Insurance sector partial exemption framework covers the basic principles of partial exemption with a focus on the direct attribution of input tax and methods of allocation of residual input tax.
Although the guidance is not mandatory or binding, and HMRC will in any case consider whether to approve a partial exemption special method where an insurer declares that method to be fair and reasonable, the introduction refers to ‘further information on what is meant by fair and reasonable’ in Annex 1. The Annex suggests that ‘fair and reasonable’ means the special method should be robust, unambiguous, operable by the business without undue difficulty, auditable by HMRC, and fair (reflecting the economic use of costs in making taxable and exempt supplies).
HMRC and the Association of British Insurers have together published new, detailed guidance to help insurers gain approval for ‘fair and reasonable’ partial exemption special methods. Insurance sector partial exemption framework covers the basic principles of partial exemption with a focus on the direct attribution of input tax and methods of allocation of residual input tax.
Although the guidance is not mandatory or binding, and HMRC will in any case consider whether to approve a partial exemption special method where an insurer declares that method to be fair and reasonable, the introduction refers to ‘further information on what is meant by fair and reasonable’ in Annex 1. The Annex suggests that ‘fair and reasonable’ means the special method should be robust, unambiguous, operable by the business without undue difficulty, auditable by HMRC, and fair (reflecting the economic use of costs in making taxable and exempt supplies).
