We recently bought a couple of machines from a company in Hong Kong for about US$60k. Subsequently our MD decided that we would finance these through an HP agreement with our bankers.
Our bankers have converted the USD to £ and have also added 20% on for the VAT on their HP agreement. Now, never having accounted for HP on anything from outside the UK (and, not entirely trusting our MD!) are we right to be charged VAT as, obviously, there wasn't any on the original invoice from HK?
If vat wasn't added and you are not liable for vat as the purchase was made outwith the UK then I would say you are right to question it but would you not have to an import duty? You might be better just calling HMRC to double check.
Jo
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Jo Gillespie AICB
Thoughts are my own and must not be taken as professional advice.
It does seem odd that the bank should add 20% VAT. I wonder if the bank is purchasing, then leasing back, but would need to look at the correspondence and agreement to confirm. If, in the alternative, the bank is simply providing loan finance, then VAT should not apply.
VAT on import will be paid, and then recovered using the C79.
