VAT and the de minimis Rule
VAT is a complex accounting topic for organisations with partial vat arrangement. Partial exemption can be a daunting area of the VAT legislation and one that it is vital to understand should you be working with VAT. This require the service of a knowledgeable accountant.

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A VAT registered business falls within the scope of partial exemption when it has supplies of both a taxable and an exempt nature. Output VAT cannot be charged on an exempt supply and equally any input VAT incurred directly in making the exempt supply, generally, cannot be recovered.

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What is an exempt supply?

Schedule 9 of the VAT Act 1994 details the type of supply that falls within the exemption and includes, amongst others, some supplies relating to health and welfare, finance, insurance, education and land. 

It is also important to consider the effect of a partially exempt business having non-business activities. Normally, it must first determine the proportion of VAT incurred relating to these activities and dis-regard this VAT before applying the partial exemption calculation. Any input VAT which is attributed to non-business activities cannot be recovered.

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