VAT standard method

Forum Categories VAT ADMINISTRATION ISSUES VAT standard method

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    One of my client is using VAT standard method of applying annual adjustment method. however I noted that this method is not representative of my client’s business as it is supplying mainly exempt services in the first years and results in unfair VAT charges.
    is use of VAT standard method mandatory? Can I choose a more representative method and argue my way with HMRC?

    I have gone though HMRC website but could not able to find clear information.


    The VAT standard method of apportioning output VAT is not mandatory – though the majority of businesses do use this method.

    Any VAT registered trader can use “special method” that suits a business’ activities better. Any special method has to be “fair and reasonable” and it has to be agreed with HMRC in advance. When using a special method no rounding of the percentage is permitted and it has to be applied to two decimal places.

    This is particularly so in the first years of trading when the business is incurring an unproportionable amount of exempt supplies which would reduce in future years.

    Commonly used special methods include those based on staff numbers, floor space, purchases or transaction counts, or a combination of these or other methods.

    However, even if a business uses a special method it will still have to undertake an annual adjustment calculation once a year using its agreed special method.

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