In HMRC v Volkswagen Financial Services (UK) Ltd [2018] C-153/17, the Court of Justice of the European Union (CJEU) ruled that HMRC cannot treat VAT on costs as solely relating to exempt finance charges when a car is bought on HP.

The case relates to how to calculate the recoverable VAT on residual overhead costs:

The First-Tier Tribunal allowed VWFS’ appeal. The Upper Tribunal found for HMRC and the Court of Appeal for VWFS.

The Supreme Court referred to the CJEU.

The CJEU ruled as follows:

The costs are a component of the sale of the vehicle and therefore the sale of the car cannot be ignored. The UK courts must now decide the outcome of the case based on this ruling.

Links

Partial exemption & input VAT

External link HMRC v Volkswagen Financial Services (UK) Ltd [2018] C-153/17