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VAT Information Sheet 4/02, April 2002

This VAT Information Sheet explains how the standard method over-ride, announced in the Budget on 17 April 2002, affects businesses using the standard method to determine the VAT they can deduct. It also describes changes to the definition of “exempt input tax” that can affect businesses that first become partly exempt. This Information Sheet assumes readers are familiar with partial exemption, and unless stated otherwise terms used here have the same meaning as those in the partial exemption public Notice 706.

Very few businesses are affected by these changes. The standard method over-ride is targeted primarily on aggressive VAT avoidance by large businesses that use the standard method to deduct exempt input tax. Fully taxable businesses and partly exempt businesses using a special method are not affected by any of these changes and need read no further. Nor are the vast majority of businesses for whom the standard method produces a fair and reasonable deduction of VAT. Other