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VAT on Hire Purchase/Purchase

Used Financing Company

Scenario - Company has bought new Machinery. There is a purchase invoice of showing the buyer as the company from Business X. Net £x, VAT £X, £gross

There is then a finance company payment schedule which shows payments will be made from the company to the finance company. The monthly payments show net£x, VAT £x, £gross

So at what point is the correct way to claim the vat? 

As the initial invoice is in the clients name, i would have thought it should be recongnised as an asset then and liability and VAT claimed when it was simultaneously claimed by the finance company. 

Then the monthly payments should have no vat claimable?

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14th Nov 2018 18:56

A sale under a hire purchase agreement is a supply of goods, so the VAT falls due at the time of the sales invoice.

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By Ruddles
to leshoward
15th Nov 2018 00:24

Agreed - but the question needs to be asked- why is the finance company raising monthly VAT invoices?

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to Ruddles
15th Nov 2018 08:30

That is, precisely, the question.

You need to establish the facts by reading the finance agreement.

Someone has made an invoicing error but we can't tell which one it is from the information given.

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By PALacc
to lionofludesch
15th Nov 2018 18:19

Me neither :-/ so I am not going mad then! I am awaiting a hefty wedge of documentation so we can work out exactly what is going on.

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