Partial exemption
If your business makes both taxable and exempt supplies, you can only recover the input VAT relating to the taxable side. OneSixth runs the standard method each quarter, applies the de minimis test, and produces the year-end annual adjustment — without breaking the digital link to your ledger.
None of the major cloud platforms automate the standard-method calculation or the annual adjustment. Practitioners run a spreadsheet and post a manual Box 4 restriction, which HMRC tolerates provided the workings are kept. The trouble is the year-end adjustment rests on quarterly workpapers that are months stale — so small quarterly errors compound silently until they surface as a material misstatement.
A business is partially exempt when it makes both taxable and exempt supplies and incurs VAT on costs serving both. It catches more businesses than people expect — residential lettings, some financial services, education, healthcare or insurance alongside taxable income. You can only recover the input VAT relating to your taxable supplies.
VAT directly attributable to taxable supplies is recovered in full, VAT attributable to exempt supplies isn't, and residual (overhead) VAT is apportioned by the ratio of taxable to total supplies. The recovery percentage is applied provisionally each quarter and trued up with an annual adjustment. OneSixth performs each step from your ledger data and shows the working.
If your exempt input VAT is below the de minimis limit you can recover it all. The test: exempt input tax averaging no more than £625 a month and no more than 50% of total input tax. OneSixth runs the de minimis test automatically each period and at year-end, so you know immediately whether full recovery is available.
At year-end you recalculate the recovery percentage across the whole year and adjust the quarterly returns to match. Because OneSixth holds every quarter's calculation against the live ledger rather than in a detached spreadsheet, the year-end adjustment is built on current workings — not figures that drifted months ago.
OneSixth maps tax codes to taxable, exempt and residual, learning your ledger's coding so classification gets faster each period.
The standard method and de minimis test run each quarter and post a reviewable Box 4 restriction — no manual spreadsheet.
The annual adjustment recalculates recovery across the year and posts the adjustment journal back to your ledger.
OneSixth connects to Xero, QuickBooks Online, Sage and FreeAgent — it calculates the VAT and posts a reviewable journal, it doesn't replace your accounting system.
A business is partially exempt when it makes both taxable and exempt supplies and incurs VAT on costs serving both. It catches residential lettings, some financial services, education, healthcare and insurance alongside taxable income. You can only recover the input VAT relating to taxable supplies.
Under the standard method, VAT directly attributable to taxable supplies is recovered in full, VAT attributable to exempt supplies isn't, and residual (overhead) VAT is apportioned by the ratio of taxable to total supplies — applied provisionally each quarter and trued up with an annual adjustment.
If exempt input VAT is below the de minimis limit you can recover it all. The test: exempt input tax averaging no more than £625 a month and no more than 50% of total input tax.
At year-end you recalculate the recovery percentage across the whole year and adjust the quarterly returns to match. Because the year-end rests on quarterly workpapers that are often months stale, small quarterly errors compound — which is exactly what OneSixth prevents.
None automate the standard-method calculation or annual adjustment; practitioners run a spreadsheet and post a manual Box 4 restriction, which HMRC tolerates provided workings are kept. OneSixth performs the calculation alongside the ledger.