VAT opportunity for partly exempt COVID-affected organisations

It’s not too late for partly exempt businesses, charities, and membership organisations to revisit partial exemption calculations.

In March 2021 HMRC published Revenue & Customs Brief 4/21 explaining options available to partly exempt businesses and organisations affected by COVID.

They recognised that the nature of supplies might temporarily change as a result of coronavirus and confirmed that they will entertain proposals which use representative income streams from earlier tax years to secure a fair and reasonable recovery rate.  HMRC have said that they will adopt a fast-track approach for applications for a temporary change to a partial exemption method.

This will be welcome news for affected businesses, charities and membership organisations provided they can demonstrate that the period in question is not representative of the use of the costs. However they would need to use a different representative period, of which they can choose from the previous three years.

If they have not done so already, we would advise all partly exempt businesses and organisations to revisit their partial exemption calculations during the period of the pandemic to check that they are not unfairly disadvantaged and if so, to act promptly.

How can MHA Moore and Smalley help?

If you need assistance with any VAT related issues, please don’t hesitate to get in touch and contact our team below.