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HMRC have published Brief 56/07, which announces a delay in the implementation of new VAT Lennartz accounting regulations.

Budget 2007 contained details of three measures concerning the VAT treatment of assets to be used partly for non-business purposes, namely:

• legislation that was introduced in 2003, and which is now ineffective, is repealed;
• HMRC have been given powers to make regulations about how VAT charges on non-business use are calculated. The effect of these regulations will be to shorten the period over which VAT charges on non-business use of land and building are paid; and
• a potential loophole in the deemed supply legislation has been addressed.

HMRC have confirmed that the ‘Lennartz Accounting’ regulations, referred to in point 2 above, which were due to come into force on 1 September 2007, will now come into force on 1 November 2007.

‘Lennartz Accounting’ is where a business allocates an asset wholly to business purposes, recovers all the VAT charged up front (subject to the normal partial exemption rules) and accounts for VAT on the non-business use in each VAT return period. The Lennartz Accounting regulations will specify the “economic life” of a ‘Lennartz asset’, that being the period over which private use should be accounted; and set out how taxpayers must account for any private or non-business use.

Links

HMRC Brief 56/07

2007 Budget Notice BN56 - VAT: Amendment to VAT Legislation Following Recent Judgments of the European Court of Justice