Commentary

RCB/31/07 Partial exemption – VAT recovery on overhead costs relating to supplies of hire purchase

Part V16 Forms and other HMRC material

RCB/31/07 Partial exemption – VAT recovery on overhead costs relating to supplies of hire purchase

RCB/31/07 Partial exemption – VAT recovery on overhead costs relating to supplies of hire purchase

Revenue & Customs Brief, Issue 31. 30 March 2007

This article explains HMRC's policy on attributing VAT on overhead costs to supplies made under hire-purchase (HP) agreements. It affects businesses that make supplies under HP agreements to consumers, but does not apply to those who arrange such supplies and receive a commission. HMRC is aware that policy is not being applied consistently, so this article confirms the policy to be applied from 1 April 2007. This article also refers to the Tribunal decision Royal Bank of Scotland (2007) VAT Decision 19983 regarding VAT recovery and HP agreements.

Background to VAT recovery

An HP transaction involves the supply of goods on credit terms. Provided the charge for credit is clearly identified to the customer, an HP transaction is treated as two supplies for VAT purposes, comprising—

  1.  

    —     a supply of goods

To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to TolleyLibrary or register for a free trial