ECJ may force change to UK VAT rules

The European Court of Justice (ECJ) may force a change in British VAT regulations over goods purchased by a husband and wife that are later used for business purposes.

Link: Brown to mount ‘vigorous’ ECJ tax defence

Under existing British VAT regulations, capital goods used for business must be bought in the name of a sole trader or company for sales tax to be reclaimed.

But an ECJ advisory ruling on a German VAT case said where a married couple buys a capital item together, which is partly used for business purposes, VAT can be reclaimed on the proportion used for work, even if both names are on the invoice.

The court said that the EU’s sixth VAT directive does ‘not require the taxable person… to deduct (VAT)… to hold an invoice issued in his name and stating the proportions of the payments and value added tax corresponding to his interest in the property held in co-ownership’.

It added: ‘An invoice issued to co-owning spouses… is sufficient’.

Under UK regulations, where a house is co-owned and part is used as an office, there is no need for the company or sole-trader to have only their name on utility bills to reclaim VAT on the business consumption, however.

Domestic housing remains zero-rated under UK law.

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