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M3. Business purposes
Intention to use goods for mixture of business and non-business
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- Three options (full, partial or no recovery)
"[39] First, it must be pointed out that it is settled case-law that, where capital goods are used both for business and for private purposes the taxpayer has the choice, for the purposes of VAT, of (i) allocating those goods wholly to the assets of his business, (ii) retaining them wholly within his private assets, thereby excluding them entirely from the system of VAT, or (iii) integrating them into his business only to the extent to which they are actually used for business purposes (Case C-434/03 Charles and Charles-Tijmens [2005] ECR I‑7037, paragraph 23 and case-law cited, and Case C-72/05 Wollny [2006] ECR I‑8297, paragraph 21)." (Puffer C-460/07)
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- If treated as fully business goods, full recovery but obligation to account for VAT on non-business use
"[40] Should the taxable person choose to treat capital goods used for both business and private purposes as business goods, the input VAT due on the acquisition of those goods is, in principle, immediately deductible in full (Charles and Charles-Tijmens, paragraph 24, and Wollny, paragraph 22).
[41] However, it follows from Article 6(2)(a) of the Sixth Directive that when the input VAT paid on goods forming part of the assets of a business is wholly or partly deductible, their use for the private purposes of the taxable person or of his staff or for purposes other than those of his business is treated as a supply of services for consideration. That use, which is therefore a ‘taxable transaction’ within the meaning of Article 17(2) of that directive is, under Article 11A(1)(c) thereof, taxed on the basis of the cost of providing the services (Charles and Charles-Tijmens, paragraph 25, and Wollny, paragraph 23).
[42] Consequently, where a taxable person chooses to treat an entire building as forming part of the assets of his business and uses part of that building for private purposes he is both entitled to deduct the input VAT paid on all construction costs relating to that building and subject to the corresponding obligation to pay VAT on the amount of expenditure incurred to effect such use (Wollny, paragraph 24)." (Puffer C-460/07)
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- If treated as partly business goods, partial recovery
"[43] By contrast, if the taxable person chooses, when acquiring capital goods, to allocate those goods entirely to his private assets or to allocate only part of them to his business activities, no right to deduct can arise in relation to the part allocated to his private assets (see, to that effect, Case C-97/90 Lennartz [1991] ECR I-3795, paragraphs 8 and 9, and Case C-25/03 HE [2005] ECR I-3123, paragraph 43).
[44] Equally, on that hypothesis, subsequent use for business purposes of the part of the goods allocated to private assets is not capable of giving rise to a right to deduct, because Article 17(1) of the Sixth Directive lays down that the right to deduct is to arise at the time when the deductible tax becomes chargeable. There is no adjustment mechanism to that effect under Community legislation as it stands, as the Advocate General states in point 50 of her Opinion." (Puffer C-460/07)
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