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HMRC internal manual

VAT Partial Exemption Guidance

From
HM Revenue & Customs
Updated
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Partial Exemption methods: example paragraphs: methods for allocation to sectors

Cost accounting

It will normally be appropriate to include the specific cost account methodology as an annex to the agreement to prevent inappropriate changes. This is particularly important where the cost allocation method is more detailed than that recorded in the audited accountson the same basis as the costs of those supplies, acquisitions and imports are allocated to the equivalent business streams by the business for the purpose of managing and operating the business.

Headcount

It will normally be appropriate to specify that staff numbers will be measured on a full time equivalent basis.

in the same ratio as the number of staff employed exclusively by each sector bears to the total, for all sectors of the number of staff employed exclusively by a sector.

Staff time

in the same ratio as the staff time used exclusively by each sector bears to the total, for all sectors, of the staff time used exclusively by a sector.

Floor space

in the same ratio as the total area of property occupied exclusively by each sector bears to the total, for all sectors, of the floor space occupied exclusively by a sector.

Inputs

in the same ratio as the value of supplies, imports and acquisitions received which are used, or to be used, exclusively by each sector bears to the total, for all sectors, of the value of supplies, imports and acquisitions received which are used, or to be used, exclusively by a sector.

Input tax

in the same ratio as the input tax incurred on supplies, imports and acquisitions received which is used, or to be used, exclusively by each sector bears to the total, for all sectors, of the input tax incurred on supplies, imports and acquisitions received which is used, or to be used, exclusively by a sector.

Outputs

in the same ratio as the value of supplies made by each sector bears to the total value of supplies made by all sectors.

Transactions

Remember that you will need to carefully define the nature of a transaction to be counted for the purpose of the method.

in the same ratio as the number of transactions made by each sector bears to the total number of transactions made by all sectors.