RCB/2/10 VAT—Lennartz accounting – new policy following ECJ case
Revenue & Customs Brief, Issue 2. 22 January 2010
Last year, the ECJ in the case of Vereniging Noordelijke Land-en Tuinbouw Organisatie v Staatssecretaris van Financien (C-515/07) – VNLTO – considered whether or not Lennartz accounting can be used by a taxpayer who engages in activities that are not within the scope of VAT. As a result of this judgment, it is now clear that EU VAT legislation does not give, and has never given, a right to use Lennartz accounting in circumstances such as those of the VNLTO case.
Who should read this?
This Brief brings UK VAT policy in line with this judgment and should be read by anyone currently using, or intending to use, Lennartz accounting. It means that Lennartz accounting will only be available in the specific, limited circumstances set out below.
HMRC's policy on Lennartz accounting as set out in Information Sheet 14/07 (V16.931, Division V16.5) now has only limited application and should be read in conjunction with this Brief.
Guidance in Information Sheet 14/07 (V16.931, Division V16.5) states that, where a taxable person incurs VAT on the cost of goods intended solely for business purposes, there is an entitlement to deduct the input tax incurred to the extent that it is used for making taxable supplies (or other supplies carrying a right to input tax deduction under s 26 of VATA 1994). See paragraph 2.4 of Information Sheet 14/07 (V16.931, Division V16.5) for the types of goods this policy