Following Hansgeorg Lennartz v Finanzamt München III [1991] EUECJ C-97/90 (11 July 1991) (‘Lennartz’), the UK tax authorities had accepted that VAT to be used for both business and non-business activities could be recovered in full in certain circumstances, provided that the VAT was then accounted for on the subsequent non-business use of the asset in question. However, further to the decision in Vereniging Noordelijke Land- en Tuinbouw Organisatie v Staatssecretaris van Financiën [2009] EUECJ C-515/07 (‘VNLTO’) this is no longer the case.

Lennartz principles will only apply where the goods are used in part for making taxable supplies and in part for private purposes or, exceptionally, for other uses which are wholly outside the purposes of the taxpayer’s enterprise or undertaking. These other uses do not include non-business activities which are part of the normal activities of the charity. What this means for charities is that if there is non-business as well as private and or taxable use an apportionment has to be made at the time of the supply.

For further information, please refer to the following HMRC VAT manuals:

• VIT25510 – What is the Lennartz mechanism?
• VIT25540 – How to apply the Lennartz mechanism
• VIT25550 – Current Lennartz users
• VIT25900 – Is it input tax: the case of VNLTO
• VIT62520 – Legal history: cases about mixed use of assets
• PE66050
• – The history of Lennartz and its interaction with Partial Exemption