implications for motor finance houses and lessors, Lombard has lost
an appeal on VAT treatment of costs of hire purchase
agreements.
Lombard, the asset finance division of the Royal Bank of Scotland,
has been in dispute with HM Revenue & Customs since 2005 over
VAT paid on overheads of hire purchase deals.
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Lombard sought to raise the rate of recovery for HP overheads to 50
per cent from its historic level of 15 per cent. The financier
argued the rise was justified, as the taxable element of overhead
costs has risen in recent years, driven by rising voluntary
termination levels causing financiers to incur higher trade-in
costs.
An earlier victory for Lombard at a VAT tribunal was overturned at
the Scottish Court of Session. Lombard can now appeal to the House
of Lords.
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