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. The financial company argued that its «Agility» agreement was a service agreement (similar to a lease agreement) because it did not necessarily provide for a transfer of ownership and, in fact, about half of its pimens decided not to pay for the balloon. In this analysis, VAT should only be paid on monthly payments. The vehicles are a little different. For commercial vehicles purchased under a rental agreement, you receive the full VAT (100%) on purchase, but NOT on monthly payments. Leases differ by claiming the full VAT on monthly payments and not the purchase. That`s the difference. Yes, you can claim VAT again on a rental agreement, but your company must have registered VAT itself to do so. The agreement must also be entered into under the name of the director of the company or company to prove that it serves a commercial purpose.

Under the judgment of the Court of Justice in the Mercedes Benz Financial Services (MBFS) C-164/16 (see VATSC10172), certain contracts that may be called lease-sale contracts are processed for VAT purposes, which are considered rental and service transactions (not as deliveries of goods and separate delivery of credit). This is the personal purchase of contracts (PCPs) or similar agreements for which the contract provides for an optional material payment. These discretionary payments can be set at different levels: goods delivered during the lease-sale or as part of a credit contract or conditional sales contract are generally treated in the same way as a normal sale whose title passes at the beginning. This means that the delivery date is linked to the basic tax point, unless the supplier issues a VAT bill. Here too, you can only deduct the interest on the company`s profits if the lease-purchase agreement on which interest is charged applies to a commercial purpose. You cannot charge your personal car z.B via corporate accounts. 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.

When assessing whether the goods acquired in a lease-sale are for commercial use, it is necessary to check whether the goods are directly related to the function and operation of the business. If the answer is no, they should not be considered eligible for the VAT exemption. Honesty is the best policy here. It is necessary to demonstrate to HMRC that the vehicle is intended only for commercial purposes in the context of the lease-sale. It cannot be used for private use. If this applies to both, you can only recover the vat share. Up to 50%. 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.

The opinion of the General Counsel of the ECJ (AG) in the Volkswagen Financial Services case (C-153/17) has been made public. In the United Kingdom, the VAT exemption on financial services includes the granting of credit under a lease-sale agreement (HP).