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HMRC internal manual

VAT Partial Exemption Guidance

Other Partial Exemption issues: Lennartz treatment: inclusion of the deemed supplies in the PE calculation

The deemed supplies are actual supplies for VAT purposes (as opposed to self-supply charges). The value of the charge on which output tax is chargeable goes into both the numerator and the denominator of the standard method, as it does not come within the exclusions listed under regulation 101(3). Normal consideration should be given to whether these values will distort calculations in each outputs based sector and this may lead to the exclusion of this charge from some or all sectors in a special method. In particular it is unlikely that inclusion of this charge in the general pot calculation when credit has already been given in the Lennartz sector will be fair.