In Volkswagen Financial Services (UK) Ltd v Commissioners for Her Majesty’s Revenue and Customs the Supreme Court has referred 4 questions on the interpretation of the VAT Directive in the context of partial exemption methods for hire purchase agreements used by VWFS in car finance deals.

The issue is whether the fact that overhead costs are incorporated into the price of exempt supplies of finance and not into the price of the taxable supplies of the cars under these agreements means that it is legitimate to ignore the value of the supplies of the cars in a special method.

VWFS contends that it not correct to ignore that and HMRC contends that to do so is required by the principles of the tax.

The Supreme Court accepted the submission of Owain Thomas QC and Amy Mannion that the issues should be referred to the CJEU.