Partial exemption ― overview

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

This guidance provides an overview of the topic of partial exemption. Partial exemption is a core area for VAT purposes and one that a range of businesses may need to consider.

For an A to Z of key terms associated with partial exemption, see the A to Z of partial exemption guidance note.

For in-depth commentary on the legislation and case law on partial exemption, see De Voil Indirect Tax Service V3.460.

A video overview of partial exemption can be found below:

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Partial exemption (A)
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Partial exemption (B)
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Partial exemption (C)

What is partial exemption?

A business that makes both taxable and exempt supplies is partially exempt. Broadly, VAT on costs related (or ‘attributable’) to taxable supplies is recoverable whilst VAT incurred on costs related to exempt supplies is irrecoverable (subject to some de minimis rules for negligible amount of exempt input tax). Partial exemption methods exist so that businesses can apportion their input tax between costs used for taxable activities (where VAT is recoverable) and costs used for exempt activities

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