In HMRC v Mercedes-Benz Financial Services UK (C-164/16), the ECJ was asked for a preliminary decision on the characterization of an “agility agreement” which, at the end of the period, included a large hot air balloon payment and not a modest option tax. Under the financial company`s regular lease, the price of the vehicle (including financing) was represented by the sum of the monthly payments, whereas, according to its “agility agreement”, 40% of that price was reflected in the payment of the balloon. The payment of the balloon represented the residual value of the vehicle at the end of the life. However, in the area of VAT, there is a strong case for debt relief not only for PCP defaults, but also when the market value is lower than that of GMFV, since PCP contracts, considered VAT deliveries, should also share VAT relief, HP agreements. On the other hand, a lease-sale agreement would constitute a property supply agreement in which the exercise of the option to purchase would be the only economically rational choice, for example. B because the sum of the payments already paid corresponded to the total cost of purchasing the goods on the financing. In these cases, at the end of the life, VAT was deducted from the total cost of delivery. The VWFs Finanzhaus provided loans to customers who wanted to buy a vehicle. It operated by purchasing the car from the dealership, while providing financing to the customer, representing all of its profits on the delivery of exempt credit. The question was how much VAT could be recovered from overhead.
The guidelines do not concern the position of customers who do not pay the GMFV, but in cases where VAT has already been accounted for in advance of the full value of the car, or where there is early termination of the PCP agreement or the processing of resales. While credit institutions and self-financial institutions (“financial institutions”) have responded by offering their clients PCP payment leave of up to three months, by compensating for arrears by spreading over the remainder of the PCP, extending the life of the pcP by an additional three months, or increasing the final payment of balloons, and as some establishments also extend these facilities to HP agreements, the volume of customers who are late beyond the three-month leave period is likely beyond the three-month leave period, as they are struggling to meet monthly payment terms. Delivery of a car under a lease agreement (HP) or a personal contract plan (PCP) is a delivery of goods for VAT purposes. Once the customer commits, there is a delivery from the car dealership to a financial institution (usually a credit institution or financial company within the manufacturer`s group of companies) and a subsequent delivery from the financial house to the customer. Both stocks are being done simultaneously. For both forms of financing, VAT on the full value of the car is paid in advance by the financial house to income when the customer takes possession of the car. Leasing contracts benefit from another business tax advantage – you can deduct interest back with taxable profits. This means that you do not pay taxes on the costs of a lease. If the total cost of your contract is z.B $1,101 USD, you are not required to tax this amount. It`s an acceptable effort. But you have to claim it to get it. It is not HMRC`s role to pick it up for you.
You claim VAT refund on a rental purchase on your next VAT return. This is quarterly or monthly if you have been registered for 12 months or more. You can normally collect VAT on a rental purchase up to 4 years after signing the contract. HMRC has just published Revenue – Customs Brief 8: Change to the partial VAT exemption. This applies to companies that provide goods through lease-to-sale contracts.