A to Z of partial exemption

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

There is often a significant volume of technical terminology that is use when discussing partial exemption. The table below provides brief explanations of some of the key terms associated with partial exemption and, where appropriate, links to guidance notes containing further details.

Term	Definition	Further details
Allocation	VAT incurred on purchases is distributed or allocated to a specific sector within a special partial exemption method	Partial exemption ― types of special method and sector specific information
Annual Adjustment	Businesses provisionally reclaim VAT on each VAT return calculated using the partial exemption method. At the end of the tax year, a partial exemption calculation is undertaken using all of the figures for the whole tax year	Partial exemption ― annual adjustments (longer period adjustments)
Apportionment	The partial exemption calculation is intended to split the residual input tax between taxable and exempt supplies. The residual input tax will be apportioned between

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