Changes in intended use—EU legislation
The basis for adjustment by reference to a change in intended use was derived from Directive 2006/112/EC, art 185(1). As at IP completion day, this provided that: 'Adjustment shall, in particular, be made where, after the VAT return is made, some change occurs in the factors used to determine the amount to be deducted, for example where purchases are cancelled or price reductions are obtained.'
In Stichting Schoonzicht1. the taxpayer (S) owned a plot of land on which an apartment complex was built. S's original intention was that the apartment complex was going to be used solely for taxable purposes and therefore input tax was recovered in full. However, before making any taxable supplies of the apartments, S changed its intention and rented out (on an exempt basis) four of the seven apartments in the block (the other three remained unoccupied).
In accordance with the law in the Netherlands, S was obliged to pay back all of the VAT reclaimed in respect of the four apartments. It lodged an objection to the Dutch provisions that required this. S argued that, for capital goods, provisions requiring an adjustment in full of the initial VAT recovery when those goods were first used were contrary to EU law (now Archived Directive 2006/112/EC, arts 184–187). Instead, it contended, the adjustment ought to be spread over a number of years. This would leave S requiring only to pay back a portion of