Personal Contract Purchase (PCP) finance agreements – VAT

Jarlath O'Keefe Jarlath O'Keefe

Could your business benefit from a VAT cashflow advantage?

In the UK the Upper Tribunal has recently delivered its judgment in the VAT case of Mercedes-Benz Financial Services UK Ltd. The Tribunal concluded that under a Personal Contract Purchase (PCP) agreement title to the goods would not pass in the normal course of events. The appropriate VAT analysis would be to treat the sale as a supply of services with output VAT due on receipt of each monthly payment as opposed to upfront VAT at the start of the agreement.

While this is a UK decision which has been appealed by the UK tax authorities, it does offer some guidance on the interpretation of the equivalent Irish VAT legislation.