V3.408 Duality of purpose; business and non-business

Part V3 Supplies, acquisitions and imports

V3.408 Duality of purpose; business and non-business

V3.408 Duality of purpose; business and non-business

UK legislation


Where goods and services are used or to be used partly for the purposes of a business carried on or to be carried on and partly for non-business purposes, the tax arising may be apportioned so that only so much as is referable to the business purposes is counted as input tax1. However, the intention to use goods and services for non-business purposes may be disregarded if the degree of use envisaged is so trivial as to be insignificant2.

The remaining tax, “non-business VAT”, is treated, with effect from 1 January 2011, as input tax only to the extent provided for in regulations3. These regulations4 provide that fluctuations in the business/non-business use of certain assets may be adjusted under the Capital Goods Scheme provisions (see V3.470).

For an alternative to apportionment, see under “EU position” below.

The legislation does not provide any statutory basis of apportionment. A tribunal has considered that the word “apportionment” necessarily implies a fair division of something. It is the antithesis of “disproportionate”5. One tribunal has made an apportionment on the basis of use6 in accordance with the optional provisions in the Sixth Directive7. Another tribunal made an apportionment by considering the relative importance of each separate purpose in the mind or minds of the person or persons carrying on the business concerned8. Another applied the proportion of business income to non-business income9. Where a building is used to store an asset which is used for the purposes of the

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