PE48530 - Consideration of Partial Exemption special methods: unsatisfactory methods: dealing with unsatisfactory methods

You must not simply ignore a method you believe to be unsuitable. It is for PE specialists to judge the level of risk associated with an unsatisfactory method which is dependent on a number of factors including the sector in which the business operates, the amount of residual input tax at stake and its future plans.

It is important that all cases where the use of an unsatisfactory PESM is identified are notified to the local TAPE team. If there is any doubt who to notify, please contact an RPESO

Use of a formal power

A number of formal powers are available to HMRC including the power to terminate the use of a special method, the power to direct a business to use a particular method - see PE51000 - Partial exemption powers: Special method override notices.

A Special Method Override Notice (SMON) allows HMRC or the business to impose an immediate override on the results of an unfair special method until a replacement method is implemented. A special method is unfair when the result it gives is not a fair and reasonable reflection of the use of goods and services in making taxable supplies and other supplies with the right to recover. See PE51100 Partial exemption powers: Special method override Notice: Introduction and law - for further information.

Note - HMRC’s powers can only be used with the express permission of the VAT Deductions & Financial Services policy team. If you consider that use of a formal power is warranted you must in all cases contact an RPESO.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
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(This content has been withheld because of exemptions in the Freedom of Information Act 2000) See PE33000 Partial exemption special methods: Introduction to special methods -(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)