**No more Lennartz for charities?**

Lennartz is the mechanism that has enabled charities to recover all their VAT upfront on capital projects even where they intend to use an asset partly for “non-business” activities, provided there will be business use. The charity accounts for output tax on the non-business use over the following ten years. HMRC now say that “non-business” will only mean “private” not “non-economic business activities”. Charities with existing claims are unaffected and HMRC will consider claims from those with binding commitments on the basis of Lennartz.

This policy change follows a European Court ruling; the interpretation of that decision may be assisted by a pending UK case. Where beneficial, charities should still claim using Lennartz as this change of policy may yet be undermined.

Terry Dockley, VAT Director, James Cowper LLP, Tel 01635 35255 or email: tdockley@jamescowper.co.uk