Complex VAT Group

Complex VAT Group

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Looking for some advice regarding VAT in a VAT group with an exempt company...

So I have a VAT group that is partially exempt. One of the companies in the group only has exempt income.This exempt income is included in the calculation to work out what the partial exemption percentage is!

My question is.... the purchases in this 'exempt income' company attract VAT so can a % of this be reclaimed in my group VAT return? My boss seem to think that no VAT should be recorded in this company and therefore no % should be reclaimed. However I think that VAT should be reclaimed as when you look at the companies in a VAT group you do so as a whole to calculate the partial exemption % and so when it comes to the input VAT all companies count towards this regardless of what income is received in that particular company.

Can anyone please advise or point me in the right direction?

Thanks in advance

Replies (6)

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By User deleted
25th Mar 2015 15:30

Your boss is wrong

The whole point of VAT grouping is to treat all of the companies as a single VAT entity. One of the specific advantages is the potential to improve recovery of input VAT incurred by exempt or partially exempt companies. Provided that the total exempt tax is below de minimis, it may all be recovered - including that incurred by wholly exempt companies.

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By shaun king
26th Mar 2015 09:46

What are we talking about?

Are we talking about VAT recovery under de minimis rules or are we talking about VAT recovery of residual under the standard method?

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By User deleted
26th Mar 2015 10:01

To expand on my answer

And perhaps deal with the point to which Shaun may be alluding, it may depend on the nature of the supplies made by the exempt company. In other words, you need to consider whether such supplies are incidental to the activities of the group (or capital disposals etc) which in turn will determine whether or not such supplies should be included in the standard method calculation.

However (please correct me if I am wrong, Shaun) I don't think that this affects the principle of being able to recover input VAT incurred by a wholly exempt company.

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Replying to jantill:
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By smiler0801
30th Mar 2015 13:51

Thanks BKD!!

Can you point me towards any guidance that supports this as they want proof before claiming.

 

 

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By shaun king
26th Mar 2015 10:15

Not at all

My question is made because it is quite feasible that a wholly exempt company in a VAT froup may incur Input tax which is non attributable (residual) and falls into the pot where there will be an element of recovery.

The wholly exempt company can also utilise the de-minimis limits for the VAT group which are progressively becoming more almost irrelevant for most partly exempt businesses with the increase in the cost of goods and services and the increase in the VAT rate.

 

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By User deleted
30th Mar 2015 14:14

Guidance

Why don't you just refer him to this thread - I can vouch for the accuracy of Shaun's 'guidance'. If your boss continues to dispute it ask him to explain why the exempt company should be excluded.

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