PE68400 - Other Partial Exemption issues: Movement of own goods: Accounting for VAT: Worked example

A partially exempt business with a residual recovery rate of 60% wishes to move goods that it uses in GB to make both taxable and exempt supplies to NI.

The net value of the goods was £500, and the business originally incurred £100 input tax on those goods and recovered £60.

The goods are exported to NI with a value of £500. An additional £100 of VAT is incurred on this movement.

Within the PE calculations 60% of £100 may be claimed as the goods continue to be used to make both taxable and exempt supplies. £60 is claimed.

The business accounts for £100 import VAT on the movement into NI as output tax on its return and recovers £60 of that as input tax. As part of the business’ longer period adjustment, the business may then recover the £40 which was originally irrecoverable.

The net result is £100 is accounted for as output tax, and £100 is claimed as input tax, hence a nil result.

If the movement was in the subsequent tax year to which the VAT was originally incurred (but still within 12 months), the total charge to output tax, and subsequent recovery can be made in the same return.