RCB/8/20 Change to partial exemption VAT treatment
Revenue & Customs Brief, Issue 8. 20 August 2020
Purpose of this brief
This brief advises businesses who supply goods by way of hire purchase agreements of HMRC's suggested method for apportionment of VAT incurred on overheads following the Court of Justice of the European Union (CJEU) judgment C-153/17 Volkswagen Financial Services (UK) Ltd (VWFS).
Who should read this brief
Businesses who supply goods by way of hire purchase agreements.
VWFS, a finance house, provided credit to customers who wanted to purchase a vehicle. It operated by purchasing the car from the dealer at the same time as providing the car with finance to the customer, making all its profit from the exempt supply of credit.
There was no disagreement that VWFS made a mixed supply, but what was disputed was the extent to which the VAT incurred on VWFS's overheads could be recovered.
The Supreme Court referred the case to the