Case details

Volkswagen Financial Services (UK) Ltd (Respondent) v Commissioners for Her Majesty's Revenue and Customs (Appellant)

Case ID: UKSC 2015/0224

Case summary


Under the 'partial exempt special method' agreed by the parties ("PESM") what is a fair and reasonable apportionment of residual input tax on costs incurred by VWFS in its retail sector in relation to general overheads in respect of hire purchase transactions which include a mixture of VAT taxable and VAT exempt supply (taxable supply of the vehicle being finance and exempt supply of finance for that vehicle)?


VWFS procures vehicles to supply to customers under hire purchase agreements. This supply includes the taxable supply of that vehicle and the exempt supply of finance. Because of this mixture, HMRC and VWFS agreed a PESM for apportioning tax, a system provided for by EU law and its UK implementing instruments. The parties reached different interpretations of the PESM. From October 2007, VWFS accounted for VAT according to its preferred method with HMRC raising assessments for under-claimed VAT in response. From October 2008, VWFS adopted HMRC's methodology, submitting voluntary disclosures for unpaid tax in the process which HMRC rejected. HMRC's decisions to raise assessments and reject voluntary disclosures are the decisions challenged in this case.

Judgment appealed

[2015] EWCA Civ 832



Commissioners for Her Majesty's Revenue and Customs


Volkswagen Financial Services (UK) Ltd



Lord Neuberger, Lord Kerr, Lord Reed, Lord Carnwath, Lord Gill (Scotland)

Hearing start date

03 Nov 2016

Hearing finish date

03 Nov 2016

Watch hearing
03 Nov 2016 Morning session Afternoon session