VAT cut and new car purchase

redboat

I ordered a new car last week and have only paid a deposit....I was due to pick the car up Friday but said I want to pick it up on Monday 1st Dec and pay the new 15% vat, saving me some money. They basically said that because the car has been registered in November it will go through at the 17.5% rate even though no monies have changed hands. Are they legally obliged to sell me the car if I pick it up on Monday at the discounted rate? I am going to contact Customs and Excise in the morning but hoped there maybe some experts on here that could offer me some advice.

Another thing they mentioned is that from Dec 1st all their models are being increased by £400 and that if I waited until Monday the price of my car would go up. I think they are incorrect as I have a contract with them when I ordered the car last week??? Or am I wrong.

Thanks in advance.

hippey

Having just read the HMRC Q&A guide, it appears to be upto the business. they can opt for the 15% rate or 17.5% rate (standard) the only guidence they have issued is to state that if they charge the lower rate they must issue refunds and credit notes for the difference.

Worth pushing a bit more though, it won't actually cost the business anything, other than time in issuing new paperwork.

JasonLVC

How strange, a £400 price rise just announced at the same time as a VAT rate reduction?. Exactly the sort of thing I've posted elsewhere on the forums would happen.

VAT is a transactional tax and so the VAT rate will be at th e point the goods are supplied or at the time of the invoice (tax points). If you do not have the car, then it is not supplied to you and so the new VAT rate should be applicable.

Otherwise, when they send you the final invoice for the balance of the money owed, this then is also a tax point.

Whilst they may argue the vehicle has been registered in November, the VAT is not set until point of delivery.

I'd put this argument to them :-

"If VAT went up by 2.5% today would you sell te vehicle to me at the old, lower rate?". The answer would be a big NO.

redboat

Thanks for your replies.

I have spoken in depth with the garage this morning stating that I won't be paying 17.5% VAT and will pick the car up on Monday when it is 15%. They tried to say that because their cars are going up on Monday I would be worse off....This is not the case as I paid a deposit last week so we are now in contract regardless of any price changes, the only issue is rate of VAT. i also made them aware of section 89 of the vat act 1994 which states that contract prices should always be adjusted where the vat rate changes before the sale is made. This threw them a bit:D and they said they will get back to me.

It turns out all of the Directors are in a meeting this afternoon to sort out what they are going to do, as I'm sure I am not the only customer raising this valid point.

I will update you all as soon as I know to help out any other people who are in the same predicament as me.

Cheers

candice56

It is worth remembering that the garage will probably have already paid for your car at 17.5% VAT and so will be most unlikely to have you take it at 15%. It sounds as if you have done a deal for a November registration too, if they risk missing target then its unlikely that they will play ball at all for a Mon/Dec registration.

Also most car purchase contracts do not automatically price protect you especially in the case of main dealerships where the manufacturer is controlling the price rises, normally says on literature subject to change without notice.

Their manufacturer probably just immediately enforced the increase to cover the stock already paid for plus costs of reprinting all of their prices lists, brochures, press adverts etc etc.

6 of one, half a dozen of another. I wouldnt taint your relationship with the dealer over this, you may get a much shorter and sharper reception on collection than you expected.

Btw what car is it, I heard Honda have had price increases on the cards for a while.

HTH

anniecave

candice56 wrote: »

It is worth remembering that the garage will probably have already paid for your car at 17.5% VAT and so will be most unlikely to have you take it at 15%.

But VAT is not a real cost to them. If they have paid VAT then they reclaim it back from HMRC anyway. They issue you with an invoice at whatever VAT rate and it's that VAT that you pay that is then paid over to HMRC.

But the Nov registration may be a problem.

Lemonade_Pockets

Manufacturer's prices are almost always gauranteed at point of order, this applies to the dealer as well as the customer and usually refers to the net price...i.e excluding VAT and OTR charges. However there will be some proviso in the T+C's incase of massive VAT or RFL increase for instance. The £400 price rise is therefore irrelevant, the dealer will not have to pay the manufacturer any more for the car wether they register in november or december.

However they are registering it and invoicing it november to enhance their sales figures for this month (in order to satisfy the dealership accountant and the Manufacturer that it is a Nov deal this will probably be a requirement).

So if you can persuade them to forfeit their sales figures and invoice it on monday theoretically you should get the benefit. However even if this was the case i still think they would try pocket the 2.5%. In short you're probably right but it'll be a hell of a fight to get it and they'll probably throw up as many obstacles as possible. One solution might be to not provide them with an insurance cover note untill december which will prevent them taxing it...but this might annoy them and unltimately not help your cause.

I'm in a almost identical situation so i'd be interested to know the outcome.

I know the ins outs of sales as i used to be sales manager however i'm not 100% on the VAT i.e. Is the dealer or the customer entitled to pocket the 2.5% if an order is placed in Nov but not completed and invoiced untill Dec. If someone could confirm that would be great.

JasonLVC

VAT is a cost to the end consumer only and is a % of the agreed selling price for the item/goods.

The tax point (when the VAT is applied) is at the point the goods are made available to the customer (the basic tax point). The basic tax point can be changed to an actual tax point where the seller either receives full payment (and this'll be the actual tax point for VAT purposes) OR when the seller issues an invoice (which he can only do after he has made the goods available to the customer).

So either way, the dealer is not losing out if he paid 17.5% VAT for the car and he sells it for 15% as the 17.5% VAT the dealer will reclaim from HMRC and the custoemr pays the 15% (which is then paid over to HMRC) so the only real loser is HMRC.

If they invoice or you you collect the car 31 November then old VAT will apply. From 01 December, new VAT rate will apply.

The AGREED COST of the car is whatever it was when you paid your deposit and cannot now change becuase of a new price rise.

Pennywise

I suspect the garage could force you to accept and pay for the car on Friday as presumably this was the original date agreed when you entered into a contract with them for the car. If you want to change delivery to Monday, you are probably technically in breach of contract and they could sue you for any loss they have suffered, such as missing their registration target/bonuses for November.

Lemonade_Pockets

Jason (or anyone else):

I have bought a new car for say £20k for easy figures. This is the figure quoted on the order form at the time it was obviously calculated as £17021.28+VAT (ignore RFL for the purposes of this). Am i obliged to pay the £20K or am i obliged to pay £17021.28+VAT which in my situation would be now 15% i.e £19574.47 in total??

Or conversley is the dealer entiled to raise the net price to 17391.30 so the total cost to me the customer remains 20K???

Lemonade_Pockets

Pennywise wrote: »

I suspect the garage could force you to accept and pay for the car on Friday as presumably this was the original date agreed when you entered into a contract with them for the car. If you want to change delivery to Monday, you are probably technically in breach of contract and they could sue you for any loss they have suffered, such as missing their registration target/bonuses for November.

I doubt it. If this clause in place it will be stipulated in the t+C's but it usually gives the customer 7-14 days to collect the car from the date the dealer informs the customer the car is available for collection (to be legally binding this notice normally has to be given in writing).
All though i have seen these t+c's on thousands of order forms in my previous life i have never seen or heard of anything like this been taken to court.
Worst case is normally customer cancels and loses their deposit. If they don't cancel (within reason) it is normally better that they pick the car up late than not at all.