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Changes in intended use—EU legislation

The basis for adjustment by reference to a change in intended use was derived from Directive 2006/112/EC, art 185(1). As at IP completion day, this provided that: 'Adjustment shall, in particular, be made where, after the VAT return is made, some change occurs in the factors used to determine the amount to be deducted, for example where purchases are cancelled or price reductions are obtained.'

In Stichting Schoonzicht¹, the taxpayer (S) owned a plot of land on which an apartment complex was built. S's original intention was that the apartment complex was going to be used solely for taxable purposes and therefore input tax was recovered in full. However, before making any taxable supplies of the apartments, S changed its intention and rented out (on an exempt basis) four of the seven apartments in the block (the other three remained unoccupied).

In accordance with the law in the Netherlands, S was obliged to pay back all of the VAT reclaimed in respect of the four apartments.