Partial exemption on car finance

The Court of Justice of the European Union (CJEU) has appeared to support the case of the tax payer in VW Financial Services (UK) C-153/17), though the language it deployed seemed somewhat tortuous.

The dispute concerns the partial exemption method that best reflects the use of overhead costs in a business where the taxable supplies (of cars) involves a sale at cost price, and the exempt supplies (the ‘finance’ package) appear to make all the profits.

HMRC had argued either that the taxable supplies could essentially be ignored as not being more than an adjunct to the provision of finance, or that the value attributed to the taxable supplies should be the margin, and not the sale price (which is tantamount to the same as the first argument).