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HMRC internal manual

VAT Partial Exemption Guidance

HM Revenue & Customs
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Consideration of Partial Exemption special methods: the declaration: background to the measure

On 1 April 2007, HMRC introduced two changes to further strengthen and simplify the special method regime:

  1. Method Declaration (Declaration)

A requirement for a business to make a declaration to the effect that to the best of its knowledge and belief its method will result in a fair and reasonable attribution of input tax to taxable supplies.

The Declaration should confirm that the method is fair from its effective date of application, and for the foreseeable future, based on the information the person signing the Declaration could reasonably be expected to know at the time.

If at any time HMRC find the Declaration to be ‘incorrect’ they could serve a Special Method Override Notice (Notice) to override the method so that from its effective date input tax would be recovered in accordance with the principle of use. Further guidance about Special Method Override Notices can be found at PE51000.

  1. Combined Method

This is a simplification which allows a business to seek approval of a method that deals with input tax on foreign and specified supplies. Full guidance on combined methods can be found at PE34500.