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Partial exemption standard method and zero rated sales

Asked by Priya K. · 29d ago

Hi all, quick one on VAT partial exemption. When using the standard method to work out recoverable input VAT on overheads, do zero rated sales count as taxable supplies in the fraction. My Kaplan book says taxable supplies includes zero rated but I just wanted to check that means they go in both the top and bottom of the calculation. Cheers
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2 answers

  • yeah your kaplan book is right. zero rated is taxable, just at 0%, so it goes in both the top and bottom of the fraction. top line is taxable supplies, bottom is total supplies (taxable plus exempt), both ex vat. so zero rated sales increase your recoverable % on overheads, which feels weird but is correct. ngl this exact point caught me out in the qb first time round.

    Tom H. · 28d ago

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  • Just to add, the QB likes to combine this with the de minimis tests. Zero rated goes top and bottom of the fraction, but for de minimis those supplies are not exempt, so they don't eat into your £625/month or 50% limit. In the exam do the fraction first then check de minimis separately, mixing them up is a mark loser. And only use the net value, don't try to add VAT to zero rated sales in either line.

    Danny R. · 25d ago

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