VAT News

Housing Associations – Important Partial Exemption Framework update

10.12.2019

HMRC have recently announced that they intend to update the current ‘Partial Exemption Framework for Housing Associations’ to reflect a change in special method applications.

When first published in 2014, the framework allowed Housing Associations to backdate Partial Exemption Special Method (‘PESM’) applications up to 4 years. The change, with effect from 1st May 2020, removes this concession and will only allow backdating to the start of the tax year in which the application is made.

We have been expecting an announcement on this issue and it will crystallize the need for action if there is benefit to be secured from a new PESM in this sector.

We would also highlight at the same time the importance of reviewing VAT processes for those associations who have been operating under the VAT “Shelter” arrangements. As the years have progressed and the original housing standard work required, at the point of transfer from the local authority, has moved through its cycle it’s important to ensure that there is no miscoding of VAT on housing stock repair costs. Does the Shelter method still work at its most effective level? Are there new staff in place where the risk of mis interpretation of the original cost allocation could increase?

We believe any “Shelter” based method in an association would benefit from a timely review of their VAT on costs allocation process, especially before the May window closes.

If you are a Housing Association that does not currently operate its VAT recovery under a PESM, or you wish to amend your current PESM, please get in touch with a member of the Centurion team at emailus@centurionvat.com. We can consider possible options available to you and, if applicable, look to submit a new PESM application (prior to May 2020) in an attempt to utilise the current framework.