AG opinion in Mercedes-Benz: VAT on leasing contracts with option to purchase

July 5, 2017


Originally published in Tax Journal on 5 July 2017.


Peter Stewart, associate and Paul Farmer, barrister and partner at Joseph Hage Aaronson examine the decision that so-called agility hire purchase contracts are a supply of services and consider its practical implications.

On 31 May 2017, Advocate General Szpunar handed down his opinion in HMRC v Mercedes-Benz Financial Services UK Ltd (Case C-164/16). The issue is whether the so-called agility hire purchase contracts entered into by Mercedes-Benz Financial Services UK Ltd (‘Mercedes’) and its customers in relation to the supply of vehicles is to be treated for VAT purposes as a supply of services or as a supply of goods under article 14(2)(b) of the Principal VAT Directive. The AG’s opinion favours Mercedes’ argument, namely that it is a supply of services. If the CJEU agrees, its decision will have considerable practical implications for motor vehicle traders and asset leasing businesses.

Continue reading on Tax Journal (subscription required) or access the complete article in PDF format.