reclaiming VAT - but how much?

Are you on any special VAT Accounting schemes (e.g. "Cash Accounting")?

If not, the standard rule is that the VAT Tax Point is the earlier of delivery of the goods and payment (or the invoice date if issued within 14 days of this date).

For finance leases, the transaction is usually considered (in the UK) to be an outright sale from the beginning (not a lease), so you would be accounting for the VAT on the full £8k from the start, since delivery of the goods in full precedes full payment/final invoice.

In other EC countries, the transaction is interpreted differently (e.g. it is a lease until the final instalment, when title formally passes; and only this last invoice is considered to be the sale of the goods, whilst all previous instalments are considered to be services, namely simple leasing). It is not an area where accountants should rely on an intuitive understanding of "VAT principles" since it is open to differing interpretations which are in reality viewed differently in different countries.

A final word on practicalities: it occurs to me that a business is not usually permitted to reclaim VAT if it does not hold a valid VAT invoice. The VAT Tax Point rules apply to the transaction for both seller and buyer alike. So the seller should be charging VAT on the full £8k at the point of delivery; and they should issue a VAT invoice for this at that time. You will also be required to pay this invoice (since the seller will pay this VAT over to HMRC). Have you received such an invoice from the seller?

If not, perhaps discuss the case with them. Not having seen the docuentation, I cannot say whether it is possible that the seller does not view the transaction as a finance lease.

Hope it helps?