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HMRC internal manual

VAT Business/Non-Business Manual

Apportionment of tax: challenging apportionments

HMRC cannot challenge a method. However, we can challenge the result it gives.

HMRC will not challenge the method immediately if a business proposes a method that:

  • we agree currently gives a fair result; but
  • we believe is likely to give an inaccurate result in future.

Instead we will:

  • tell the business about our concerns now; and
  • in the future challenge the misleading result.

HMRC may disagree with the proportion of tax a business treats as input tax. When this happens we will initially bring our concerns to the attention of the business. We will ask the business to alter or justify the result of its method.


  • the result is outside the range of what might be considered fair and reasonable; and
  • the business will not change the proportion

HMRC will substitute our own judgement. We will then assess for the difference in input tax between our figures and those of the business.