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HMRC internal manual

VAT Partial Exemption Guidance

Consideration of Partial Exemption (PE) special methods: introduction

For the vast majority of partly exempt businesses the standard method will be fair and reasonable and no special method will be required.

The special method regime exists for those circumstances where the standard method is unsuitable. It is not there to allow businesses to request, or HMRC to direct methods which offer marginal changes to the standard method recovery percentage.

The standard method is generally a simple calculation to perform and audit. The standard method override gives HMRC and businesses an assurance that significant variations from the actual use of the input tax will be corrected.

Special methods by contrast tend to be more complex and do not offer HMRC or businesses override protection. It follows that special methods need to offer other significant advantages over the standard method to offset it’s inherent benefits.