Partial exemption ― types of special method and sector specific information

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

This guidance note looks at several of the most common ways that a partial exemption special method may operate in order to calculate recoverable VAT.

For special methods generally, see the Partial exemption special methods guidance note. For an overview of partial exemption more broadly, see the Partial exemption ― overview guidance note.

In depth commentary on legislation and case law can be found in De Voil Indirect Tax Service V3.462.

Type of special method ― Sectorised methods

Sometimes it will make sense to split a business into separate parts as there is not a single method which would fairly apportion residual input tax across all areas of the business.. Each different part or ‘sector’ then calculates its own residual recovery rate in a way that is appropriate for how residual costs are used in that sector. Such a method is commonly known as a ‘sectorised’ approach and can be fairly common as a special method.

Each sector in a sectorised method must reflect the following:

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