Commentary

RCB/2/10 VAT—Lennartz accounting – new policy following ECJ case

Part V16 Forms and other HMRC material

RCB/2/10 VAT—Lennartz accounting – new policy following ECJ case

RCB/2/10 VAT—Lennartz accounting – new policy following ECJ case

Revenue & Customs Brief, Issue 2. 22 January 2010

Introduction

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.

Background

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

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