VAT
VAT Partial Exemption: When You Can't Recover All Input VAT
Mixed suppliers — how much VAT can you actually reclaim?
Mixed supplies
If you make both taxable and exempt supplies, input VAT relating to exempt supplies is not recoverable.
The apportionment
Use a turnover-based ratio (taxable/total) to apportion overhead VAT. Direct-attribution rules apply for supplies clearly linked to one activity.
Annual adjustment
Recompute apportionment at year-end. If the annual ratio differs materially from the interim, adjust in the final VAT return.
Special methods
The MRA can approve alternative apportionment methods (floor area, headcount) if turnover distorts the result.
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