Local Authority Partial Exemption
As a Local Authority you are now required to undertake a partial exemption calculation for the year 2009/10, following several years when there was no need to do this.
Negotiating and implementing a favourable partial exemption method with HMRC for 2009/2010 will be key to this and the earlier this is done the better.
In order to do this, your Council will need to monitor its VAT exempt activities and expenditure from April 2009 to ensure that, where possible it stays within the 5% deminimis limit.
Which of your activities are exempt from VAT?
Examples include:
- Land transactions
- Education - where paid for
- Sports - long series of lets
- Cultural Activities
- Crematoria
Once these activities have been identified you can the agree and put in place your partial exemption method:
Managing the process - some things to remember:
- You should notify HMRC of the method you wish to use, in broad terms, before the start of the financial year it relates to
- Complete discussions and have the final method agreed in writing by the December
- Finalise your calculation and include any necessary adjustment on your VAT return by 31 October following the year end
- Your method will need to take into account any VAT incurred on revenue expenditure within each are of exempt activity; on revenue expenditure recharged into each area of exempt activity; on capital expenditure where the project is to be put to exempt use
- However, there is no set method of allocation or apportionment and any method must be fair and equitable
- It is common practice for auditors to check that such agreeent are in place
- Monitor your partial exemption position as regularly as possible to avoid nasty surprises and ensure that, if necessary, you have the maximum opportunity to mitigate any action
- Regularly review capital expenditure as any unexpected changes can result in serious partial exemption problems
- Do you need to consider Change of Intention or the Capital Goods Scheme?
Want to know more? Why not book a place on our essential seminar which will equip you with all the information you need to complete your partial exemption calculations.
