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Annual VAT recovery rate adjustment review

Annual VAT recovery rate adjustment review

A reminder for all businesses involved in both VAT exempt and VAT taxable activities with a 31 December year end and filing VAT returns on a bimonthly basis, that your annual VAT recovery rate adjustment for 2017 should, at the latest, be included in the May/June 2018 VAT return, which will be due by 23 July 2018.

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Typically businesses which carry out both VAT taxable and VAT exempt activities are entitled to full recovery on costs directly attributable to their VATable activities, no VAT recovery on costs directly attributable to their VAT exempt activities and partial VAT recovery on general overhead costs which relate to both VAT taxable and VAT exempt activities.

A number of different types of methodologies have traditionally being used by businesses to calculate a partial general overhead VAT recovery rate including, turnover, staff usage, floor area (for property) etc. As a basic example, a business with 80% VATable activities and 20% exempt activities will be entitled to recover 80% of the VAT incurred on its general overhead costs.

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