VAT briefing for July 2017

MBFS: supply of goods or services

In HMRC v Mercedes-Benz Financial Services UK Ltd (Case C-164/16) (reported in Tax Journal 16 June 2017) Advocate General Szpunar (AG) opined on when a lease will constitute a supply of goods (rather than services) for VAT purposes. Under article 14(2)(b) of the VAT Directive (2006/112/EC) there will be a supply of goods where goods are handed over pursuant to a contract for their hire or sale on deferred terms which provides that ‘in the normal course of events ownership is to pass at the latest upon payment of the final instalment’.

MBFS offers three financial products related to the use and acquisition of vehicles: leasing hire purchase and a mixed agreement called ‘Agility’. Under an ‘Agility’ contract the customer hires a...