Partial exemption ― payback and clawback

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

This guidance note provides an overview of the VAT payback and clawback rules. These rules can apply where there are changes in intended use of costs prior to their first use.

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

For in-depth commentary on the legislation and case law, see De Voil Indirect Tax Service V3.467.

Payback and clawback ― the basics

The payback and clawback provisions broadly apply in circumstances where:

•
a business recovers (or does not recover) VAT on costs it incurs based on its intended use of those costs
•
the intended / actual use changes before the original intention is fulfilled

SI 1995/2518, regs 108–110; Notice 706, para 13.1

The provisions require adjustments to input tax recovery to be made to reflect the change in intention as to how the costs are to be used.

For example, a largely exempt business might purchase property and recover VAT incurred on the basis that it intends to let out the property

Continue reading the full document

To gain access to additional expert tax guidance, workflow tools, and tax research, register for a free trial of Tolley+™

TAKE A FREE TRIAL NOW

Popular Articles

Corporation Tax

Associated companies ― from 1 April 2023

Associated companies ― from 1 April 2023Implications of associated companiesFrom 1 April 2023, the rate of corporation tax that a company is subject to depends on the level of its augmented profits. The rate of tax is based on a comparison of the company’s augmented profits against the corporation

22 Mar 2021 10:21 | Produced by Tolley Read more

Personal Tax

VAT on property disposals

VAT on property disposalsThis guidance note provides an overview of the VAT treatment of selling property that is located in the UK. The UK includes Great Britain, Northern Ireland and the territorial sea of the UK. The sale of any land or building located outside the UK is outside the scope of UK

14 Jul 2020 13:57 | Produced by Tolley Read more

Employment Tax

Classes of NIC and who pays them

Classes of NIC and who pays themClass 1 NICClass 1 NIC is payable on earnings paid to an employed worker which derive from, or are treated as deriving from, an employed earner’s employment in the UK. There are two kinds of Class 1 NIC, primary contributions for which the employee is liable and

14 Jul 2020 11:13 | Produced by Tolley in association with Jim Yuill at The Yuill Consultancy Read more

Brexit

��Ƶ