Input tax – business and non-business or private use

By Tolley

The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Input tax – business and non-business or private use
  • Methods
  • Option 1 – Leave the goods wholly outside of the business
  • Option 2(a) – Apportion the VAT
  • Option 2(b) – apportioning VAT under <a class="remotelink" href="/tolley/guidance/valueaddedtax/linkHandler.faces?linkInfo=F%23GB%23UK_ACTS%23sect%2524%25num%251994_23a%25section%2524%25&amp;A=0.6991664685164084&amp;bct=A&amp;ps=&amp;risb=&amp;service=citation&amp;langcountry=GB" target="_parent">VATA 1994, s 24(5)</a>
  • Option 3 – asset treated as a wholly business asset
  • Lennartz Accounting
  • Mixed use of services
  • Cathedrals and churches
  • Goods – change in use
  • Services – change of use

This guidance note provides information on how a business can determine the amount of VAT that can be recovered in respect of goods / services used for a mixture of business and non-business / private use.

VIT20000; De Voils Indirect Tax Service V3.408; V7.443 (subscription sensitive); VATA 1994 s 24(5); 2006/116/EC, Articles 26 and 168a ; VATA 1994, Sch 4(5); VATA 1994, para 94(1)

There will be occasions where a business will purchase goods and services that will be used for business and non-business / private purposes. The business will need to implement a method to deal with the VAT due on the private / non-business use of the asset. The business can choose one of the options outlined below in order to account for any VAT due on the private use of the goods / services.

One of the methods that could be used by businesses radically changed with effect from 1 January 2011 and the majority of businesses are no longer entitled to use the Lennartz accounting mechanism as the basis for calculating the amount of recoverable input tax.

Please note that HMRC has a manual that deals with business and non-business activities found in VBNB10000.


If a business has incurred VAT on expenditure, including land and property, and the expense will be used for both business and non-business / private purposes, then it will need to devise a method to determine how much VAT can be recovered. Businesses have the following options available to them:

  • leave the goods wholly outside the business and treat them as wholly private or non-business assets
  • bring the goods partly within the business and apportion the tax incurred on them
  • apportion the tax incurred on capital items of immovable property (including

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