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). Leasing contracts benefit from another business tax advantage – you can deduct interest back with taxable profits. This means that you do not pay taxes on the costs of a lease. If the total cost of your contract is z.B $1,101 USD, you are not required to tax this amount. It`s an acceptable effort. But you have to claim it to get it. It is not HMRC`s role to pick it up for you. If the option tax is significantly less than the expected market value, HP contracts include delivery of goods for which VAT is required at the beginning and separate delivery of VAT-exempt financial resources. With regard to PCP contracts, the correct treatment of VAT depends on the amount of the balloon payment option and what a customer would do as a “rational economic operator” if he is allowed to exercise a purchase option. Although PCP agreements are a little more complicated than HP agreements, von Revenue`s offerings for PCPs are not as extensive as PS`s. Prior to the COVID crisis, comments from the automotive industry indicated that less than 2% of PCP customers exercised the (i) hand-back option, which could indicate that the issue of debt relief is still present in a necessary volume, at the request of the industry, to advise on these issues and update their advice on THE PCP accordingly.
Specific rules for the operation of debt relief under HP agreements assume that debts are due under the agreement. The procedure for non-performing debt instruments under HP agreements takes into account the total amount paid (in bulk) by the customer under the HP 36 instalments. With respect to PCP contracts, there is also room for default on staggered payments, but full payment of these payments could still pay only 60% of the value of the vehicle to the financial home. The outstanding is the GMFV, but since it is not an amount of the means of payment and is it totally discretionary (until the choice of option (ii) its non-payment by the customer at the end of the financing period constitutes a missing debt? 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.”