01
Three recovery buckets
Input tax is first attributed to taxable use, exempt use or residual use. Taxable input tax is generally recoverable, exempt input tax is generally restricted subject to de minimis, and residual input tax is apportioned.
- Taxable attribution
- Exempt attribution
- Residual costs
- Non-business use
02
Method and adjustment
The standard method uses values of supplies, but it may not always provide a fair proxy for use. A special method requires approval, and the annual adjustment revisits provisional period calculations across the longer period.
- Standard method
- Special method
- Standard method override
- Annual adjustment
Primary sources
Tax guidance changes. These official sources were checked on 31 August 2026.
VAT Notice 706: partial exemption