VATSC10174 | Supply: Whether supplies are goods or services: Distinguishing between purchase and hire agreements: Balloon payments

In some hire purchase agreements, there is a final instalment for a large amount. This is often called a balloon payment. It is usually quite clear from the agreement that a price for the purchase of the goods has been agreed at the outset. Provided the balloon payment is not optional under the terms of the contract (it will normally simply be the final contractual instalment) the contract is for a supply of goods. A much smaller option payment may also be paid immediately after the final balloon payment.