VAT apportionment should be regularly reviewed says Saffery Champness

Saffery Champness says farm and estate businesses should consider whether their annual VAT apportionment calculation remains fit for purpose.

 Like many things on the tax front the annual VAT apportionment exercise may be routine, but farm and estate businesses that are partially exempt from VAT should not just put off carrying it out, but should review it on a regular basis says Saffery Champness.

Where too little VAT has been paid then more will be due, but in many cases VAT will have been overpaid resulting in a tax refund.

David McGeachy, Partner with Saffery Champness, Head of VAT, and a member of the firm’s Landed Estates and Rural Business Group, says:

Where there may be doubt that the apportionment method used is giving a fair and reasonable picture of the deduction of input tax then it can and should quite legitimately be changed. HMRC’s written approval is required for this to happen or for a ‘special method’ of apportionment to be applied.

Even where a ‘special method’ has been agreed in the past this too can be renegotiated with HMRC and a further ‘special method’ implemented.  This is especially relevant and necessary where business circumstances have changed since the previous agreement with HMRC was put in place.

So if in doing your VAT apportionment this year, you think that circumstances have changed or that you are not seeing the offset that you think should be due, take the trouble to renegotiate with HMRC. Even a minimal increase of 5 per cent per annum in what you can recoup will be worth pursuing, particularly when it accumulates over a number of years.

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