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Hire Purchase Agreement

Can anyone clarify for me the correct way to treat the vat on a HP agreement. Should the input vat be claimed as the repayments are made over, in this case the 5 year period. Or can the vat be reclaimed at the start if say the total vat element is £10k and an initial payment of £20k has been made? As a seperate matter the finance charge will be expensed to the periods it relates to over the 5 year period.


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At the start

You claim all the VAT at the start of the HP agreement.

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many thanks

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Yes claim at start by posting the Invoice for the purchase of the item.  You will not have been sent a  VAT schedule for the reclaim over the period as you would have in the case of a lease.

The payments reduce the HP Liability and a separate posting is made to claim the monthly interest on the P&L, crediting the HP Account.












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Vat on HP agreement

Thanks Jane thats very helpful.

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