If you use the cash accounting system, the goods you sell under credit or conditional sales contracts are excluded from the plan. In HMRC v Mercedes-Benz Financial Services UK (C-164/16), the ECJ was asked for a preliminary decision on the characterization of an «agility agreement» which, at the end of the period, included a large hot air balloon payment and not a modest option tax. Under the financial company`s regular lease, the price of the vehicle (including financing) was represented by the sum of the monthly payments, whereas, according to its «agility agreement», 40% of that price was reflected in the payment of the balloon. The payment of the balloon represented the residual value of the vehicle at the end of the life. The financial company argued that its «Agility» agreement was a service agreement (similar to a lease agreement) because it did not necessarily provide for a transfer of ownership and, in fact, about half of its pimens decided not to pay for the balloon. In this analysis, VAT should only be paid on monthly payments. If you sell credits with a financial company, the financial company is also: a «credit sale» refers to the sale of property that immediately becomes your client`s property, but for which the price is paid to you in installments. A «conditional sale» is where you deliver goods to a customer, but the goods remain your property until they are paid for. A tax point is the date on which you must account for VAT on the sale of goods or the provision of services.
There are different types of tax points and you need to make sure that you get the right transaction on the right VAT return. On the other hand, a lease-sale agreement would constitute a property supply agreement in which the exercise of the option to purchase would be 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 the financing. In these cases, at the end of the life, VAT was deducted from the total cost of delivery.