Private use of yacht

A limited liability partnership bought a yacht to use for its chartering business and for private purposes. The firm claimed the entire input tax paid on the purchase of the vessel. It subsequently applied the Lennartz mechanism to calculate the private use.

(The European Court of Justice in Lennartz v Finanzamt München III (C-97/90) [1995] STC 514 ruled that a taxable person is entitled to recover input tax incurred on the purchase of goods however small the proportion of business use.)

HMRC did not accept the calculations and increased the VAT on private use.

The taxpayer appealed saying Lennartz should not apply after all because the boat was used solely for business and a commercial rate would be paid for private use.

The First-tier Tribunal decided output tax was due on private use but disagreed with the Revenue on the periods in which the vessel...