Don’t forget your VAT adjustment:
As a partially exempt business you’re required to review the VAT you’ve reclaimed over the previous twelve months and make an annual adjustment. What should you be looking out for to ensure you’ve maximized your claim?
One of the basic VAT rules is that you can’t reclaim VAT on purchases which you use to make exempt sales. However, some expenses, essentially overheads, such as premises and IT costs, may be used in the process of making exempt and VATable sales. This is known as residual VAT and you’re entitled to reclaim a proportion of it.
Standard Method of Apportioning Residual Input Tax:
Input Tax Method:
This method of allocation of residual input tax is as follows: Recoverable input tax / Recoverable and non-recoverable input tax This percentage is applied to the residual input tax.