HMRC v Mercedes-Benz Financial Services UK

In HMRC v Mercedes-Benz Financial Services UK (Case C-164/16) (4 October 2017) the CJEU held that a leasing contract in which the lessee has a genuine option not to proceed with the purchase at the end of the term is a contract for the supply of services.

Mercedes-Benz offers three types of contracts for financing the use of cars: a standard hire agreement known as ‘Leasing’; a ‘Hire Purchase’ agreement; and a leasing agreement with an option to purchase called ‘Agility’. Under the three types of contracts ownership of the vehicle remains with Mercedes-Benz throughout the term. The Leasing agreement excludes any transfer of ownership but the Hire Purchase and Agility agreements provide for a transfer of ownership. Under the Hire Purchase agreement the aggregate of the monthly payments represents the total sale price of the vehicle including the cost of financing. Under an...