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Buying dilemmas
KEY POINTS
- VAT on equipment that relates to both taxable and exempt sales residual input tax for partial exemption purposes.
- An annual adjustment calculation may be required for a partial exemption calculation.
- The annual adjustment can make a significant difference if income fluctuates.
- Apportionment or the Lennartz mechanism may be relevant if there is private use.
- If only a percentage of VAT was claimed on purchase this will also apply on sale.
When I first started advising accountants about VAT more than 20 years ago I often had to interrupt them when they said that ‘exempt and zero rated mean the same thing’. They do not but it is also important to understand the difference between non-business private and exempt use in relation to both buying and...
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