PCP vs Lease

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greybox

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Haha yep that's the thing. A PCP is mostly a lease in disguise and when I called VWFS to ask whether the PCP monthly payments have VAT on them, they confirmed that they do but I've asked two Porsche dealerships about this and they say that there is no VAT on the PCP monthly payments! So I wonder which one it is?
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I would believe VWFS over the dealers.

Have a look at the Mercedes Benz agility case if you are bored. PCP since then has been treated as a supply of services (rental) rather than goods. This confirmed that with PCP, VAT was due on each payment the customer makes, hence why VWFS will be charging VAT on the monthly payments and there is no difference between contract hire and PCP.
 
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Yes I thought I would believe the VWFS over the dealers too as it's the VWFS who are trained in this sector. I saw that Mercedes case too! I will call up VWFS tomorrow and confirm again. It's because I originally wanted to go with a contract hire company as their quote was only £1220 incl VAT per month and I would get to claim 50% of the VAT so it would be cheaper than that.
My local dealership quoted for PCP and quoted around £1270 per month but they said there would be no VAT on it to reclaim (whereas VWFS said there should be) so I figured that the PCP would work out more expensive if I could not reclaim the VAT.
I would prefer to go with the dealership as a PCP will make me the registered keeper which helps a lot with insurance quotes, however if I will struggle to get VAT invoices then it would work out too expensive!
 

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Get porsche to give you a contract hire price. Mine is on contract hire with them and the monthly price was the same as PCP.

The excess mileage charge with Porsche was 12p I think versus my usual lease company at 60p per mile. Payments were the same so I went with Porsche incase I went over my allowance.

Dealers just seem to want to push PCP, assume they get more commission from it.
 
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Yes they gave me a contract hire price and it was just around £25 per month more than the PCP but you're right!

But yeah, I think they get more commission from PCP as Porsche know that you might be tempted to trade your car in early for another model or they can persuade you to trade your car in at the end for another car instead of just walking away easily like you would do with a contract hire.
 
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greybox

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Did you manage to get the monthly VAT invoices which you had been requesting?
 

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Yes, got them a few days ago. Not sure if it was because I chased them up via email or if they are just slow in sending normally. They sent a full years payment and VAT schedule in one letter. That's on contract hire, assume PCP will be the same approach.
 

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I would believe VWFS over the dealers.

Have a look at the Mercedes Benz agility case if you are bored. PCP since then has been treated as a supply of services (rental) rather than goods. This confirmed that with PCP, VAT was due on each payment the customer makes, hence why VWFS will be charging VAT on the monthly payments and there is no difference between contract hire and PCP.
I'm about to purchase with a PCP and have the same issue here - the dealer and VWFS both say no VAT (or rather, it's included in the payments). My reading of the new HMRC regulations here seem to say otherwise. I'd love to get the VAT back (or 50% of it) if I could.
 


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MB Finance in the UK took HMRC to court saying that PCP supplied cars were VAT qualifying at the end of the period. This happened a few years ago hence the confusion
 
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I'm about to purchase with a PCP and have the same issue here - the dealer and VWFS both say no VAT (or rather, it's included in the payments). My reading of the new HMRC regulations here seem to say otherwise. I'd love to get the VAT back (or 50% of it) if I could.
Yes that is the issue, both the dealer and VWFS said there is no VAT in the PCP payments and although MB finance took them to court and all of the accountants that I have spoken with have stated that there should be VAT on the payments, I don't think VWFS understand this yet! So I just decided to go with Business contract hire, although I'd have loved to do PCP instead.
 

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If it helps, I managed to get round to asking the VAT partner what the official treatment should be on PCP. His response is below:

Since 1st June 2019, the correct treatment of PCP and similar contracts depends on the level at which the final optional payment is set:

If, at the start of the contract, it is set at or above the anticipated market value of the goods at the time the option is to be exercised, the VAT treatment of the contract will follow the MBFS judgment. It is a supply of leasing services from the outset and VAT must be accounted for on the full value of each installment, there is no advance, or credit, so there is no finance – therefore 50% of the VAT is recoverable by a VAT registered business purchasing a car in this way.

If, at the start of the contract, it is set below the anticipated market value, such that a rational customer would buy the asset when they exercise the option, it is a supply of goods, with a separate supply of finance. VAT is due on the supply of goods in full at the outset of the contract, the finance is exempt from VAT. Just like a cash or HP purchase a VAT registered business cannot recover any of the VAT unless they intend to use it exclusively for business purposes (not available for private use – including home to office journeys). A ‘pool car’ is one such intended business use.

So, just like the accounts treatment, which is case by case basis depending the agreement, the VAT position will also differ depending on the agreement. My view is if you want to be safe and be able to get the 10% VAT back, go with Contract Hire. You are at the mercy of the finance company and otherwise.
 

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I asked VWFS what their position was on this and directly referred to the HMRC document you've quoted from to above. Their response was:

A PCP agreement is treated as a full sale with a subsequent credit agreement to repay the cost of the sale to Porsche Financial Services. As such, as far as HMRC are concerned, the VAT requirements of the transaction are satisfied in full at the point of sale. We issue one VAT invoice after the agreement goes live.

If you are looking to reclaim VAT on your payments for a purchase agreement, all you need is the VAT invoice, a copy of your agreement and your annual statements or a COI if you’re entitled to it.

Should you have any further questions, please feel free to contact us.

You can also find lots of information on our website at www.porschefinancialservices.co.uk or please call our customer services team on 0344 871 0902, between 9am and 5pm Monday to Friday
So, at least in the UK it's treated as an outright purchase with 100% first year capital allowance. No VAT reclaim unless it's 100% business use.
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