It is very commom for a smaller business to have assets which have been acquired which are used for both business and private use.
Traditionally, this could be dealt with either by claiming only the percentage of the input VAT which corresponded to the percentage of business use or by claiming all the input VAT and then making a VAT charge (i.e. adding to the output VAT payable) for the private use on an ‘as you go’ basis. This latter method is called ‘Lennartz accounting’, after the VAT case that established the principle.
Following a Dutch VAT case, however, the use of Lennartz accounting has been considerably restricted and, in 2010, HMRC issued revised guidance on the correct VAT treatment in such cases.
