Lease-to-sale contracts last between 2 and 4 years, although the contract can be settled at any time throughout the contract. The ECJ rejected HMRC`s arguments. In order to be a contract for the supply of goods under Article 14, it must be concluded that “ownership of the goods must be automatically acquired by the lessor if the performance of the contract is normal over the duration of the contract” (stand [34]). This contractual result (the transfer of ownership) is “incompatible with a real economic alternative for the taker” (stand [37]). If, as here, the lessor has a real option not to exercise the purchase option at the end of the period, it is a service contract. As a result, VAT is payable only on monthly payments. The main difference between buying leases and buying the contract is that instead of having the choice to buy the vehicle you would have with the purchase of the contract at the end of the contract, you have already entered into a contract to purchase the vehicle at the end of the contract. This contract is reserved for those who are absolutely sure that they want to take possession of the car at the end of the contract and pay all the balloon payments related to the contract. Under the judgment of the Court of Justice in the Mercedes Benz Financial Services (MBFS) C-164/16 (see VATSC10172), certain contracts that may be called lease-sale contracts are processed for VAT purposes, which are considered rental and service transactions (not as deliveries of goods and separate delivery of credit).

This is the personal purchase of contracts (PCPs) or similar agreements for which the contract provides for an optional material payment. These discretionary payments can be set at different levels: on the other hand, a lease-sale agreement would constitute a property supply agreement, for which the exercise of the option to purchase was the only economically rational choice, for example. B because the sum of the payments already paid corresponded to the total cost of purchasing the goods on a financing basis. In these cases, at the end of the life, VAT was deducted from the total cost of delivery. You can`t claim capital bonuses with shorter leases, but the leasing company can do that, so you should benefit indirectly from lower rental fees. Also, because it is a business expense, you can generally deduct all rental expenses from your taxable income. Financial institutions involved in leasing operations are persons responsible for the provision of: goods delivered during the lease-sale or under a credit contract or conditional sales contract are generally treated in the same way as a normal sale whose title has been passed.