My client requires Partial Vat accounting.
We know the proportions of Exempt/Non-exempt service that they provide, so we are able to calculate the proportion of input Vat claimable.
We have set up a Hybrid Vat rate within the software, that is used on all relevant purchases, and results in the correct proportion of vat to be captured at transaction/line item level. This then feeds the Vat return, thereby ensuring the Vat claimed is the correct proportion.
At the end of the year we recalculate the proportion, calculate the Vat that should have been claimed, and then do a single journal to put this adjustment onto the next Vat return.
I can't find any specific guidance in the HMRC manuals about how the bookkeeping should be done. Can anyone point me to relevant section ? Does the above process sound acceptable ?