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HMRC internal manual

VAT Groups

Divisional registration: exempt input tax

Divisional registration will not be granted where the corporate body, as a whole, is partly or wholly exempt; that is exempt input tax incurred by the corporate body, as a whole, must not exceed the de minimis limits stated in Regulation 106(1) of the VAT Regulations 1995, SI 1995/2518:

  • £625 per month on average, and
  • does not constitute more than half of all the input tax incurred for the period in question.

This is due to the difficulty involved in carrying out proper audit trail of all the divisions by our officers. Businesses should know if they are likely to make exempt supplies and we would expect that we are made aware of this at the point of application.

However, if a corporate body, which has already been granted divisional registrations, incurs exempt input tax, which exceeds the de minimis limits, it must advise HMRC immediately, telling us how it is going to deal with the restriction of input tax so that a decision can be made as to whether the divisional registration should be allowed to continue or whether a single registration is needed.

Further guidance on Partial Exemption can be found in the Partial exemption guidance.