Goods or services?

Nature of financing contract for VAT

Mercedes-Benz offered three types of contracts for financing the use of cars: a standard hire agreement known as leasing which excluded any transfer of ownership; a hire purchase agreement which included a transfer of ownership; and a leasing agreement with an option to purchase called Agility. It was accepted that the leasing contract was a supply of services and that the hire purchase contract was a supply of goods. The issue was the correct VAT treatment of Agility contracts. HMRC said it was a supply of goods but the taxpayer argued it was a supply of services because ownership of the vehicle did not pass to the customer as a matter of course.

The Upper Tribunal had allowed the taxpayer’s appeal but HMRC took the case to the Court of Appeal which referred it to the Court of...