Changes to Partial Exemption – Standard Method – from 01 April 2009

HM revenue and Customs have announced changes in their Information Sheet 04/09 to the Standard Method for calculating partial exemption.

Basically businesses may now

• use the previous year’s percentage to determine the provisional recovery of residual input tax in each VAT return prior to the year end adjustment
• bring forward their annual adjustment to the last VAT return of the tax year

and;

• for newly exempt businesses HMRC are allowing input tax to be recovered on a

use-based’ basis rather than the old complicated basis of the ‘Standard Method override’ in the registration period or during the first tax year depending on whether the conditions can be satisfied.

This all means that the correct amount of VAT is accounted for earlier than perhaps it once had been.

Elysian Associates
April 2009

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