ARE HIRE PURCHASE AGREEMENTS CATEGORISED AS GOODS OR SERVICES FOR VAT PURPOSES?
I have a client who bought a van on HP for £50,000 + VAT. They recovered the £10,000 of VAT up front on the basis that it should be treated as a supply of goods. HMRC have queried the client’s VAT recovery because the agreement refers to ‘period of hire’ and has an ‘option to purchase’ of £100 at the end of the agreement. They are arguing that because the agreement is termed as a hire, and there is an option payment, that this is a service and so VAT is only recoverable on the monthly payments. Are they correct?
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