Resale of hire purchase cars in VW Financial Services

VW Financial Services (TC06811) has failed to obtain a £24m refund of VAT from HMRC, claimed on the footing that it should not have declared VAT on the secondary sale of cars surrendered by owners under an unexpired hire purchase contract.

This was based on two arguments. First, that in handing back the car, the hire purchase contractor had resold the car to VW Financial Services, and accordingly the second-hand margin scheme applies, at a purchase value that makes achieving a positive taxable margin a virtual impossibility.