Partial exemption ― annual adjustments (longer period adjustments)

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

This guidance note looks at partial exemption annual adjustments and longer period adjustments.

For an overview of partial exemption more broadly, see the Partial exemption ― overview guidance note. See also in particular the related Partial exemption ― standard method and Partial exemption ― special methods guidance notes.

For in-depth commentary on the legislation and case law in this area, see De Voil Indirect Tax Service V3.466.

What is an annual adjustment?

A business will normally be required to undertake a partial exemption calculation each VAT return period in order to provisionally determine the amount of recoverable input tax incurred during that period (see, for example, the discussion of provisional recovery in the Partial exemption ― standard method guidance note).

At the end of the tax year (or other longer period), a business is required to redo the partial exemption calculation using the figures for the whole tax year / longer period in order to calculate the actual amount of recoverable input tax for the whole period. Where there is a difference

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