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HMRC internal manual

VAT Margin Schemes

From
HM Revenue & Customs
Updated
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Specific circumstances: Hire-purchase sales using finance companies

 

Eligible items which are sold under a hire-purchase (HP) agreement are actually being sold directly to the finance company, who in turn sells the goods to the customer.

The sale is treated as a cash sale; and the cash price of the item, as shown on the HP agreement, should be entered in the trader’s stock book as the selling price.

The trader must attach a copy of the completed HP agreement to the customer’s sales invoice or include a cross reference to the agreement in the sales records.

What if there is no copy of HP agreement? If the trader does not have a copy of the HP agreement because it is held by the finance company, he must keep a copy of the agreed quotation or agreed proposal document in his sales records. He must also include the name of the finance company, date and reference of the final agreement. This will enable you to consider sending a reference to the local VAT office for the finance company, should there be any doubt about the value of the transaction.