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In my article on input tax apportionment issues I explained that if a business partly blocks input tax on the purchase of an asset for private/non-business use then output tax is only chargeable on the same percentage of the sale proceeds in the future.
So if only 60% input tax was claimed on buying a van used partly for non-business purposes then output tax would only be £120 if the van was sold in the future for £1 000 plus VAT: £1 000 x 60% x 20%.
A number of readers have asked me for an HMRC link on this conclusion which can be found in their internal guidance at VIT25240. To quote from the guidance note:
‘For VAT purposes the asset is treated as if it were effectively two assets; one within the business (the included part) and one...
