VBNB33100 | VAT Business and Non-Business: Principles: Reviewing the Method

A business should keep its method under review and should notify HMRC if there are significant changes in the nature or levels of business/non-business activities.

When approving methods, especially complex ones, HMRC will send a letter to the business indicating the basis on which we accept the method.

For example, if it is based on income it will be because at the time the agreement is made income provides an accurate indicator of non-business activity. It will be made clear in the agreement letter that the method will need to change if this is no longer the case.

If the method is complex HMRC will record its understanding of what is meant by the various terms and categories used in the method. Over time both HMRC staff who approved the method and the representatives of the business who sought it are liable to change. It is important their successors understand how the method should work.

Any approval of an apportionment method will be noted on HMRC’s records. We may check that the approved method has been carried out as part of our usual interaction with customers. We may also check that it still represents a fair and reasonable reflection of the business and non-business use of mixed-use input VAT,