Andrew Needham looks at accounting for VAT on private use of goods bought for a business and the economic life of those goods for VAT purposes.
Where a business purchases goods, recovers all the VAT on their purchase and then puts them to a private use as well as a business use, it has to account for VAT on the private use by treating it as a supply of services to the business even if no actual payment is received. That is, it is treated as a deemed supply for VAT purposes.
Businesses can avoid having to account for VAT on private and non-business use of an asset by only recovering the input VAT relating to expected business use.
For example, if the business thinks the asset will have 65% business use it only recover 65% of the VAT on its purchase. If it does this, the business will not have to account for VAT on any subsequent private.<
