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Can VAT on a commercial vehicle be reclaimed on HP

How to treat the VAT element that's charged on the purchase of commercial vehicles bought on HP deal

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A removals company who purchased a commercial vehicle from Mercedes Benz on their Hire Purchase terms over three years with an option for final purchase settlement at the end of this period are asking if they can reclaim this VAT (on the assumption that their initial deposit exceeds the entire VAT value) and that they have already been invoiced the whole amount including the VAT, even though a H.P. agreement has been with the Motor dealers finance company.

What I need to know is whether the VAT can be claimed out-right or should it be spread over the term of the lease. I would have thought that it is spread out over three years, but Mercedes Benz have issued them an invoice at the point of sale which is stated at full price including VAT at 20 percent?   


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14th Nov 2017 12:19

Whose name is on the invoice?

"option for final purchase "

If Option for purchase then have they purchased or has finance company purchased?

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14th Nov 2017 12:23

The Company's name is on the invoice.

The company has purchased but the finance company has met the majority of the full cost of the vehicle.

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14th Nov 2017 14:07

You say the vehicle was bought on hire purchase.

Then you ask if the VAT should be spread over the lease.

Is it HP or a lease ?

The answer won't be the same.

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to lionofludesch
14th Nov 2017 16:39

It is a HP agreement, that's for sure.

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to Murat001
14th Nov 2017 16:43

Claim all the VAT and stop calling it a lease.

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16th Nov 2017 12:04

This is one of the first principles of VAT that I ever learned, about 38 years ago! The deposit for HP agreements was always '10% + all the VAT', on the basis that the purchaser would reclaim the latter and could otherwise be better off.

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