VAT change

MrChips

Apologies if this has been asked before - couldn't find anything specific in earlier threads.

I bought an engagement ring in late November when VAT was 17.5%. My girlfriend is now my fiance :j

However we have to go back to the shop to get the size of the ring altered and it struck me over the weekend if I had delayed my purchase by a few days, I would have saved about £100 in reduced VAT (assuming they passed on the reduction).

Not very romantic I know (;) ) but...is there anything to stop me returning the ring and then buying it straight back at the lower VAT rate (assuming the shop will play ball)?

The chap who sold me the ring is the father of a friend of mine so he might be slightly more flexible than for a complete stranger. Is there any tax law which could prevent this?

RayWolfe

Only fraud, that's all.

lesley1960

RayWolfe wrote: »

Only fraud, that's all.

I'm not sure it would be classed as fraud? , no different to anyone returning goods to any store if the store allows returns

MrChips

RayWolfe wrote: »

Only fraud, that's all.

:eek:

Oh dear - that wasn't my intention at all. I was planning to return it anyway and buy it back on a different credit card that offers cashback (previous credit limit wasn't high enough when original purchase made).

Without wanting to sound facetious, how could we arrange this without inadvertantly committing VAT fraud?

Also, I can't see how it would be any different to purchasing something before a sale, seeing the price drop and taking it back and buying it back at the sale price which (as far as I know) is legal!

Frozenace

If you can guarantee that you can get the same ring and buy it back at the reduced VAT rate, I'd go for it, since it's the government that's funding the reduction anyway.

MrChips

Frozenace wrote: »

If you can guarantee that you can get the same ring and buy it back at the reduced VAT rate, I'd go for it, since it's the government that's funding the reduction anyway.

Getting the same ring shouldn't be a problem as the sales adviser is a friend's dad (who I also know reasonably well).

However all this may still be hypothetical if they haven't reduced prices in the wake of the VAT cut!

derrick

MrChips wrote: »

I would have saved about £100 in reduced VAT (assuming they passed on the reduction).

That is quite a price for a ring, about £5000 to save £106 with a reduction of 2.13%, which is the vat reduction,(it isn't actually 2.5% when you do the calc).

MrChips

Most expensive thing I have ever bought, but she's worth it

However if I can get it for £150 cheaper (including cashback on my credit card) - so much the better

RayWolfe

Wow! Apart from the clear lack of morals, what are you putting in the way of your "friend"?
If people who are saying, "this is fine" would think about it for 10 seconds they would understand that on the next VAT audit, one of the first things they will look at, are credits issued in the months following a tax reductions.
Then it's your "friend" who at the least has to pay the difference, let alone whatever penalties might be imposed. Bet he would be pleased to know you.
What I find fantastic is the screams of people on this board and elsewhere saying how insignificant the VAT reduction is ... just take a look at the number of people already committed asking if they will get the reduction when they take delivery. Now this, saying I've already purchased and can I have some money back! As for frozenace, it is not money from the Government, it is we taxpayers.

MrChips

Unfortunately I don't know how VAT works - that's why I'm asking the question here before I see him. I do appreciate your warnings even though they imply that I'm doing something dodgy! If it's going to cause any issues or hassle of course I won't put my friend to any trouble.

I was looking at it from the naive perspective of it being no different to taking something back to a shop, and then repurchasing it when you realise it is now on sale. Not everyone would think this is morally correct, but at the same time a lot of people would think it is savvy shopping.

Going back to my point about returning it and buying it back to get the cashback on my credit card (again, slightly analagous to the VAT situation in that there is no additional cost to the retailer but better for me) how would this work from a VAT perspective. When I rebuy it, the VAT will be 15% so surely either the shop will profit or I will?? Or will the shop be obliged to charge the same amount and pay VAT at the original rate?

JasonLVC

Well apart from the fact that fraud is a very SPECIFIC criminal act with the usual Mens Rea test being applied and the act of permanently setting out to decieve.....

There is no VAT fraud/con/scam or anything taking place here.

November 2008 - You bought a ring with VAT @ 17.5%. The VAT element goes to HMRC and the rest is kept by the shop.

You return the ring in December 2008, they will raise a credit note/credit receipt for the original transaction thus claiming back the 17.5% from HMRC as if the transaction never took place.

Then you buy the ring again, this time in December post VAT change, shop sells you the item at whatever cost plus VAT @ 15%, the 15% is paid over to HMRC, shop keeps the rest.

No-one loses out, customer gains a 2.5% advantage. I suppose technically the treasury is 2.5% down but not becuase of fraud but becuase THEY lowered VAT.

If your shop owning friends doesn't mind, go for it.