If the financial home regained possession of property prior to the lease as a result of an early termination or failure of the client, the security would not have been transferred from the financial home to the client, so that a subsequent sale would be a taxable benefit on which the financial house must account for VAT. The Irish Revenue Guidance on VAT and hire purchase agreementsvi finds that financial institutions are entitled to proportionate debt relief for leasing transactions when a default occurs with respect to the VAT element of arrears. When a lease-sale contract is terminated prematurely and the car is returned to the financial home, a debt refund may be invoked with respect to the VAT component of the unpaid payments (subject to the application of forms to remove the value of the interest of the amounts paid to date and the amounts remaining to be paid for determining the value of the security tax). In some cases, the financial document also serves as a VAT invoice when it is issued to the customer and normal delivery times apply. A VAT invoice issued to the customer, whether it is the agreement or a traditional VAT invoice, creates the tax point for the delivery if it is issued in advance or within 14 days by the basic tax point. This article provides only an overview of some of the effects of standard operations and vehicle removal under HP or PCP agreements. We are happy to discuss the specific impact this will have on your business. Delivery of a car under a lease agreement (HP) or a personal contract plan (PCP) is a delivery of goods for VAT purposes. Once the customer commits, there is a delivery from the car dealership to a financial institution (usually a credit institution or financial company within the manufacturer`s group of companies) and a subsequent delivery from the financial house to the customer. Both stocks are being done simultaneously. For both forms of financing, VAT on the full value of the car is paid in advance by the financial house to income when the customer takes possession of the car.
Although the PCP revenue guidelines regarding the availability of end-of-debt assistance are not followed, it confirms that “revenue is prepared to accept that a PCP can be treated as a delivery of goods, in the same way as a standard lease-sale contract in which, at the beginning of the agreement, the only economically reasonable choice for the customer is to purchase the vehicle at the end of the contract.” Therefore, on a comparable basis, the full range of effects and facilities for products delivered under HP agreements must also apply to products delivered under PCP contracts. While the exercise option (ii) will see the title in the customer`s car passport, exercise option (iii), and largely unknown to the average customer, the title will be given to the customer before moving to another location, usually returning to the original car home.