In Bramall Contracts Limited & Others v HMRC [2018] TC06648, the FTT concluded that VAT had not been recovered on cars purchased for leasing and therefore the repayment claim for VAT on manufacturer bonuses were recoverable.

  • BCL was representative member of a group which carried on a business of fleet leasing of vehicles to businesses.
  • Car manufacturers paid bonuses to BCL based on the number of cars purchased.
  • Under EU case law, these bonuses are treated as discounts on price.
  • HMRC have historically treated the bonuses as consideration for a standard rated supply by the lessor to the manufacturer but changed this treatment following the CJEU ruling.
  • BCL made a Fleming claim dating back to 1988 and HMRC refused repayment leading to the appeal. The purchase of the cars was financed by a sale of the cars to finance houses and input VAT would have been recovered. This would make the error self-cancelling.

It was accepted that, given the length of time that the claim was over that BCL would not be able to prove that it had not recovered input VAT. It was therefore agreed that if the FTT found that input VAT was not recoverable due to the input VAT block for Cars, BCL would not have recovered it and the repayment claim could proceed.

The FTT found:

  • If BCL had bought the cars and leased them to the customers it is clear they would not be entitled to recover the input VAT on the purchase.
  • The cars were, though, used as security for loans from finance houses.
  • VAT can be recovered if the cars purchased were unused and supplied to BCL for the purpose of being sold:
    • BCL’s purpose was to lease the cars as this was the first supply that they made with the car.
    • The sale to the finance house was not the purpose of the car’s purchase.
    • There was one short period, 1994-95, where the FTT were not sufficiently satisfied that the cars were purchased for the purpose of leasing.

The FTT concluded that, with the exception of 1994-95, the input VAT was blocked on the cars purchased for leasing. This meant that the errors would not self-cancel as HMRC believed was the case.

BCL’s appeal was allowed and they could recover the VAT apart from for 1994-95.


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Bramall Contracts Limited & Others v HMRC [2018] TC06648