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Legal updates affecting opticians

Floor Area VAT Method

A recent case before the Tax Tribunal concerned HM Revenue & Customs’(HMRC) refusal to allow opticians DCM (Optical Holdings) Ltd to use a partial exemption method based on the use of floor area within its premises.

Rather than use the standard method to calculate the percentage of VAT recoverable as input tax, the company proposed a method which identified areas used solely for taxable purposes (spectacle displays and lens manufacturing  laboratories) and areas used solely for exempt purposes (sight testing rooms and dispensing desks). Other parts of the premises, such as toilets, stairs and inaccessible parts were excluded from the calculations. The resulting proportion of premises used for taxable purposes was applied to the overheads and other non-attributable costs to determine the percentage of   residual input tax  that could be reclaimed.

The Tribunal was persuaded that the proposed method was acceptable, but rejected the company’s contention that weighting should be introduced to reflect the increased rental value of the front of shop areas where spectacles were displayed.

This case should serve to remind opticians that any method for apportioning costs between taxable and exempt supplies can be proposed to HMRC so long as it produces a result that is both fair and reasonable.

We would recommend that if you are considering using a ‘floor area’ method for calculating VAT that professional advice is sought and that the method is approved by HMRC prior to being implemented.

Morris & Co have a dedicated team specialising in VAT and ophthalmic accounts and are able to provide advice and guidance on all aspects of financial accounting, taxation including partial exemption & business matters.

For a FREE no obligation chat about your circumstances Contact Desirie Lea on 0151 348 8400 or email


  • "Over a number of years Morris & Co have provided me with sound financial and business advice. Their in depth knowledge of my particular sector has proved invaluable and they explain my accounts in a way that is easy to understand. All my questions are answered promptly and efficiently and I really appreciate their level of expertise."
    David Evans, R T Booth & Co Ltd
  • "When appointing an accountant it was very important to me to select someone who was not only knowledgeable but friendly and approachable. I have always received proactive, professional advice and I know that the specialist advice I require to run my business is only ever a phone call away. A VAT full cost and apportionment calculation was recently undertaken for my company. As a result of this, my percentages have reduced, thereby saving me additional money."
    Ian McGarvey, Ian McGarvey Opticians Ltd
  • "Having had dealings with Desirie Lea of Morris and Co from the very inception of my company, I have always been impressed with how approachable everyone has been, from the partners to the receptionists. I had spoken to several accountants before instructing Desirie to take charge of my accounts, and from the first phonecall, Desirie impressed me with her forthright manner and her perceptive analysis of various scenarios I put to her. She is always on the ball and is a pleasure to deal with."
    Lloyd Griffiths, Lloyd Griffiths Limited
  • "Desirie and her team have been acting on my behalf since 2002 and I am delighted with the service they provide. As specialists in the ophthalmic sector, they are able to take away the stress of dealing with the partial exemption calculations for VAT purposes, which is a real bonus. I have regular meetings with them at my premises to discuss strategic issues and plan for the future. Management accounts are prepared on a quarterly basis for my company which includes a detailed analysis/commentary of my trading results. I would have no hesitation in recommending the services of Morris and Co to my fellow professionals."
    Anne O'Loan, Niluain Ltd

Contact Desirie Lea on:

0151 348 8400 or email for a FREE no-obligation discussion and for information about how we can assist you in maximising your tax relief.