Lease Purchase Agreement - AIA

Allowed?

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Hi all

Client (Ltd Co) has purchased a van on a Lease Purchase Contract. He's part-ex the old van, paid a deposit and has 36 'rentals' to pay.  I'm trying to establish if this type of contract is eligible for AIA under the assumption the company owns the asset (same as Hire Purchase). I've checked https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca23310 and clarified that once the final payment is made the goods belong to the company in full.  Has anyone come across this and claimed the AIA in such circumstances? 

Thanks

Mike

Replies (5)

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RLI
By lionofludesch
20th Sep 2016 21:56

It's probably a hire purchase contract with a big final payment but you need to see the contract to make sure.

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Replying to lionofludesch:
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By bigmuggsy
20th Sep 2016 22:27

Thank you. This particular contract is fully paid by instalments without a big final payment confusing me further!

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Euan's picture
By Euan MacLennan
21st Sep 2016 10:55

In case of doubt, check if VAT is being charged on each monthly instalment. If it is, the contract is probably a lease, but if not, it is probably a purchase.

However, if the van belongs to the company when the final payment has been made it is likely to be a purchase on credit. Claim the total VAT and AIA at the start of the contract.

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Replying to Euan MacLennan:
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By bigmuggsy
21st Sep 2016 11:03

Euan

As always thank you.

VAT isn't being charged on each payment, therefore I'll claim VAT and AIA.

Many thanks again and best regards

Mike

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Replying to bigmuggsy:
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By DMGbus
21st Sep 2016 11:24

Another clue is to look at the deposit - it is customary for loan / HP type agreements to require that all of the VAT on the cash price of the asset be paid as part of the initial payment deposit.

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