London: +44 (0)20 7236 2601
St Albans: +44 (0)1727 869141
Rickmansworth: +44 (0) 1923 771010
Milton Keynes: +44 (0)1908 605552

Are you fair and reasonable?

H M Revenue & Customs have issued more guidance on the new declaration that is required to accompany all applications to use a special method for VAT partial exemption from 1 April 2007.

You are required to declare that to the best of your knowledge and belief the special method you are proposing “fairly and reasonably represents the extent to which goods and services are used or to be used in making taxable supplies”. A template for making the declaration has been given in HMRC Brief 23/07. See

But what is fair and reasonable? If HMRC approves a method but subsequently decide that the method being used gives excessive input tax recovery they can override the method and retrospectively recalculate the affected VAT returns. Great care therefore needs to be taken by the person signing the declaration to satisfy himself that he is fully aware of the result the proposed method will have on all areas of the business and that it is “fair” to both the business and the Treasury. Call me cautious but I am not sure I would want to sign this. “Fairness” is a matter of opinion.

HMRC expect this to raise £20 million in 2007/08, so they clearly intend to challenge many of the methods proposed. Will the risk of a later challenge mean there will now be fewer applications?



Date: 30th March, 2007
Author: Roger Bell


Articles from this Author

Contact a Private Client Partner


Mercer & Hole’s @GudgionJa progress in @CelebJustDance - Not much longer to Waite now….. @MKDonsSET

Mercer & Hole’s Michael Lapham impresses at the @MoneyMgmtMag Financial Planner Awards…



For the latest Mercer & Hole news, visit our LinkedIn page mercer-&-hole

Click here to follow us on LinkedIn