What is ‘fair and reasonable’ apportionment of residual input tax? Lorraine Parkin reviews the recent First-tier Tribunal decision in Volkswagen Financial Services (UK) Ltd which presents an opportunity to claim a VAT refund
Any business which is involved in making supplies which for VAT purposes are both taxable and exempt is required to operate a VAT attribution and apportionment system known as ‘partial exemption'.
The system is required in VAT law as under the provisions of the VAT Directive (Directive 2006/112) input VAT which is incurred by a business which is attributable to its exempt supplies is in principle not reclaimable.
In simple terms a business is required to analyse the VAT it incurs between its exempt activities and its taxable activities. This is known...
