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HMRC internal manual

VAT Business/Non-Business Manual

HM Revenue & Customs
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Legal history: cases about disposal of assets

Please note that the following material is not a full summary of the case - it merely highlights the principle referred to in the appropriate section of this manual.

Bakcsi 2002 STC 802

The taxpayer bought a car from a private individual and used it for both business and private purposes. The taxpayer subsequently sold the car. The Court ruled that where a taxable person uses a capital item:

  • for both business and private purposes; and
  • has incorporated that item wholly into their business assets

the sale of that item is wholly subject to VAT.

The fact that the item was bought second-hand from a private individual and therefore the taxpayer could not recover input tax on its purchase was irrelevant. The Court observed that a taxable person who acquires a capital item for mixed purposes may keep it entirely within their private assets and thereby exclude it entirely from the VAT system.