Lennartz accounting and private use of assets

By Tolley
Lennartz accounting and private use of assets

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

  • Lennartz accounting and private use of assets
  • What is Lennartz accounting?
  • Rules applicable from 22 January 2010
  • Rule effective from 1 January 2011
  • Applying Lennartz
  • Calculating the VAT due using Lennartz

This guidance note provides an overview of the VAT recovery rules relating to costs that are used for both business and private purposes, and what businesses need to do if the use of an asset changes.

Please see the Business and non-business guidance note for details of assets that are used for both business and non-business purposes. This note also provides more information on the types of apportionment businesses must undertake to calculate the amount of recoverable input tax incurred on assets that are used for both business and private purposes.

See the Change of use guidance note for the VAT treatment of assets where the business has changed the use of those assets (ie the taxable use and either gone up or gone down).

What is Lennartz accounting?

In 1991, the CJEU issued a judgement that businesses should be entitled to deduct all of the VAT incurred on the purchase of goods that would be used for both business and non-business purposes. The Court established the following:

  • the right to deduct VAT depends upon the intention of the business at the time of purchase
  • the VAT registered business should be entitled to recover all of the VAT incurred on the purchase of the goods even if they will be used for both business and non-business purposes
  • the right to recover all of the VAT incurred is not impacted by any private use providing that the goods will be used for some genuine business purpose
  • the private use of the goods will be treated as a taxable supply of services by the business and VAT will need to be accounted for on the value of the non-business / private use

Lennartz C-97/90 ; VIT25540, VIT25510; 2006/112/EC, Articles 26(2), 75 ; VATA 1994, Sch

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