Commentary

V7.351 VAT incurred for non-business purposes

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.351 VAT incurred for non-business purposes

Part V7 Tax planning | Commentary

V7.351 VAT incurred for non-business purposes

The basic principle is that VAT incurred on expenditure for non-business purposes is not input tax at all and should be excluded from any calculations before partial exemption issues are considered. See Example 10.

Example 10

John trades as a sole proprietor and is VAT registered, making taxable and exempt supplies. The percentage of taxable supplies is 80% of total supplies.

He has just purchased a piece of equipment for £20,000 plus VAT of £4,000 that will be used for non-business purposes for 20% of the time. For the remainder of the time, the equipment will be

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