»Ê¹ÚÌåÓýapp

Section 24(5) of VAT Act 1994 directs a business to apportion tax to reflect use in its business and non-business activities but it does not specify any method to use, therefore any method which results in a fair and reasonable apportionment of the tax may be used.

When making an apportionment you should keep in mind:

• the various activities of the business; and
• the use of the costs incurred.

In practice there is likely to be a range of acceptable methods of apportionment. However, HMRC may challenge a method if it is not considered to achieve a fair and reasonable result.

It may be that a single basis of apportionment of mixed-use input VAT does not achieve a fair and reasonable result. Instead you may need to use a range of apportionments of different groups of costs. This may be a similar process to establishing cost pools or sectors for partial exemption.

A business may make both taxable and exempt supplies and have to make an apportionment between business and non-business use. Unless it has written approval from HMRC the business must carry out the business/non-business apportionment process before, and quite separately from, any partial exemption calculations. See PE30500

»Ê¹ÚÌåÓýapp calculations must not be combined, if the business wishes to apply the partial exemption de minimis limit and/or the Capital Goods Scheme. For more on the Capital Goods Scheme, including what to do if the business has a combined method, see PE Partial Exemption PE67000.

»Ê¹ÚÌåÓýappre is no de minimis limit for non-business input VAT, it is irrecoverable subject to VBNB30200 below.

Please note the partial exemption de minimis limit does not apply if a business has a combined method. »Ê¹ÚÌåÓýapp business must restrict any input tax recovery suggested by the calculation. This is so even if the result of a combined method calculation falls below the de minimis limit that would apply if the business had a separate partial exemption method.