Changes to standard method for partial exemption
Do you operate the partial exemption standard method?
If so, you should be aware that HMRC have recently issued information sheet 4/09 which outlines four changes to the partial exemption standard method for VAT returns commencing on or after 1 April 2009.
Three of the changes are optional and do not need approval from HMRC. The three optional changes are known as:
- In-year provisional recovery rate
- Early annual adjustment
- Use-based option for new partly exempt businesses
The final change, which is known as – widening the scope of the standard method is compulsory and affects businesses that make:
- Supplies of services to customers outside the UK
- Certain financial supplies such as shares and bonds
- Supplies made from establishments located outside the UK
Full guidance on how the changes apply are set out in the Information Sheet.
These changes aim to simplify the partial exemption rules and reduce compliance costs for businesses, both of which are welcome steps in an ongoing attempt to simplify this area of the tax.
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Jane Stacey is a VAT Manager at Mercer & Hole.
Date: 27th April, 2009
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