HMRC Brief - Partially exempt VAT registered businesses affected by Coronavirus

Maria McConnell | 24 March 2021

HMRC Brief - Partially exempt VAT registered businesses affected by Coronavirus


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HMRC have released Business Brief 4 (2021) - Partially exempt VAT registered businesses affected by Coronavirus.

The brief sets out an accelerated process for VAT registered businesses to request temporary amendments to their partial exemption method, to reflect changes that may have occurred to their business practices due to the coronavirus. 

As we know, many businesses have been unable to continue to trade since the pandemic struck due to the enforced lockdowns.  In many cases, business have been forced to close entirely but some businesses which have been able to continue to trade to a lesser degree may have experienced a shift in the levels of specific income streams, which may have resulted in their partial exemption method producing a more restrictive recovery rate than would normally be applied if trading was able to continue as normal.  HMRC have now recognised that this extra restriction on input tax recovery during a period of time when income is severely restricted, may be placing an additional, and unfair burden on partially exempt businesses.

With this in mind, HMRC are inviting businesses to review their current partial exemption method and, where relevant, request a temporary amendment to the recovery percentage used, based on a previous year’s trading.  Providing the methodology remains fair and reasonable and the basis for the amendment can be linked to the impact of coronavirus, then HMRC have agreed to accelerate the approval process in relation to any such changes, subject to conditions being met.

Partially exempt businesses that believe these measures may be beneficial can find out more via the attached business brief or can contact our VAT specialists for further advice and assistance.

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