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HMRC internal manual

VAT Partial Exemption Guidance

Partial Exemption powers: special method override notice: approval of businesses' notices

Generally, a Notice served by a business should be dealt with by the local Partial Exemption Liaison Officer (PELO) or RPESO, who should contact the Special Method Unit (SMU) or the appropriate PESO in Partial Exemption policy team to discuss the case at the earliest possible time after receipt of the notice.

Notices should normally be approved, as their only effect is to introduce a use override on the business’s special method: the purpose of the approval stage is to weed out ‘fliers’ and to give certainty.

A Notice should be rejected if:

  • it does not contain the required information;
  • no reasons are given as to why the existing special method is not fair and reasonable (in respect of the principle of use); or
  • the reasons given do not explain why the special method results in an unfair recovery of input tax (e.g. where the existing method is fair and reasonable, but the business wants another method with a higher recovery rate).
  • the Commissioners have recently directed a special method and there have been no changes in the business that would have resulted in the method not being fair and reasonable.

A PESO should approve a Notice if, taken at face value, there is a problem with the special method that needs to be addressed. If in doubt whether to approve or reject a Notice, or if the reasons are a little vague, contact the business to find out whether there is a genuine problem with the method that they want to resolve.