Charter and Private usage - Lennartz or not?

[PEJ]

A question for anyone who has a coded boat and charters it out but also uses it for private use. With regard to reclaiming VAT, have I got this right ....

It seems you have a choice of declaring that you use the boat, for example 40% private and 60% charter, in which case you claim back 60% of all the VAT on the boat purchase and on-going costs like berthing, servicing, etc. But the HMRC have to agree that the percentages are correct?

Or you can go with the Lennartz aproach which is difficult to summarize but here goes. You divide the cost of the boat by five years, (20 quarters). In each quarter you have to say how much use was private and pay back VAT on that proportion. So if you paid £200k divide that by 20 = £10k. If you had 50% private use that quarter then you fork out 10,000 x 0.5 x 17.5% = £875 to the VAT man for that quarter. But you can reclaim and keep 100% of your VAT from on-going costs.

So is the above correct and any thoughts on which is the best option to go for?

 

[jfm]

A question for anyone who has a coded boat and charters it out but also uses it for private use. With regard to reclaiming VAT, have I got this right ....

It seems you have a choice of declaring that you use the boat, for example 40% private and 60% charter, in which case you claim back 60% of all the VAT on the boat purchase and on-going costs like berthing, servicing, etc. But the HMRC have to agree that the percentages are correct?

Or you can go with the Lennartz aproach which is difficult to summarize but here goes. You divide the cost of the boat by five years, (20 quarters). In each quarter you have to say how much use was private and pay back VAT on that proportion. So if you paid £200k divide that by 20 = £10k. If you had 50% private use that quarter then you fork out 10,000 x 0.5 x 17.5% = £875 to the VAT man for that quarter. But you can reclaim and keep 100% of your VAT from on-going costs.

So is the above correct and any thoughts on which is the best option to go for?

Description is correct and non Lennartz will generally be better (though it depends on the precise numbers and percentages which only you can tell us). Reason Lennartz is usually worse is the 5 year assumed straight line depreciation, which isn't law but is HMRC firm policy and you wont get them to budge from it without risking more than the boat cost on legal fees. The 5 year depreciation makes for quite expensive Lennartz VAT payments when you use the boat, yet you still have to account for VAT on the ultimate sale price so you can easily end up not saving any VAT at all with a Lennartz method, or paying more VAT than if you'd just bought the boat privately.

Getting the right answer is a number crunching exercise and you dont give enough data. Without any more data I'd always say go for non-Lennartz. You have a free choice whether to use Lennartz or not, btw, as you say

And if buying a new boat I wouldn't use either of these 2 alternatives but that wd be thread drift