Changes to partial exemption

1 January 2011 will see significant changes to the partial exemption system. At the time of writing the measures are still under consultation and could be subject to change.

The Lennartz system of accounting for private use of business assets will cease for all costs falling on or after 1 January. Under Lennartz, all the VAT could be reclaimed, but the business had to account for VAT on deemed private use as it arose, thus giving it a cashflow advantage. From January the input tax will have to be apportioned. Where the purchase is of sufficient value, it will be subject to adjustment under the Capital Goods Scheme (CGS).