Avoiding the VAT rise on new car

cleagarr_2

Cheers chaps,

Seems logical BUT can a dealer create an invoice without knowing a serial or reg (or whatever) number i.e. before the car is actaully manufactured and delivered to the dealer?

EDIT: Dealer is telling me that he is paying for the car when it is manufactured and ready for delivery so therefore he will pay the 2.5% as it will be after 1st Jan, therefore this will be passed on to me. Is this how it works?

JasonLVC

Yes, I'm afraid that is how it works. The 'time of supply' or the 'time of payment' will determine what VAT rate is applied.

If dealer physyically pays for the car in January then the manufacturer will charge him 17.5%, he'll be able to reclaim this VAT in full as he is selling it onto you.

If he sells onto you (ie, delivers or receives the cash) before December then he charges you 15%, if in January he'll charge you 17.5% - remember, the VAT charged is not the dealers, he is just collecting it off you to give to Mr Brown so the dealer isn't making any profit on the VAT increase, the government are and if you are buying under scrappage scheme the £2k discount will probably cover the VAT element of the car anyway if the car costs less than £7,600.

What you have to check is your sale contract - did you agree a price of £15k including VAT or was it £15k PLUS VAT becuase it makes a big difference!. I suspect it is the later, it usually is. If including VAT then that means you agreed a price of £15k, regardless of VAT rate changes. If the price agreed was £15 plus VAT (subject to VAT change), then you've got no room to manouvre.

I suppose it is still possible for the dealer to take your money before they buy the car - if you treat your money as a deposit (ie, pay them 90% deposit @ 15%) and then upon collection of the car in January you pay the final 10% @ 17.5%

Premier_2

cleagarr wrote: »

...
EDIT: Dealer is telling me that he is paying for the car when it is manufactured and ready for delivery so therefore he will pay the 2.5% as it will be after 1st Jan, therefore this will be passed on to me. Is this how it works?

I thought I had already explained? That is nonsense.

JasonLVC has given you the link that explains the rules. He is correct that, because of anti-forestalling measures introduced, then the invoice date is not so important - it is the payment date.
However, as I explained earlier, the dealer wouldn't be prepared to raise an invoice today unless you were prepared to pay today anyway because he has to pay VAT to HMRC on any invoices raised even if you haven't paid him.

Look, just tell the dealer what you are prepared to pay.
It's up to him how he wants to make up the paperwork, (and when you must pay) and therefore how much he gives to HMRC (as long as its legal).
It is possible to sell you the car @ 15% VAT if he wants to enough.
If he can't sell you the car for a bottom line of £x, walk away and go to another dealer ... there's plenty out there looking for business. You can probably save a lot more than the 2.5% he's arguing over if you shop around and negotiate anyway.

AdrianHi

Unless there is some special guidance to the contrary for car sales Premier is correct and the car salesman is also correct.
Car sales business will have to pay the extra 2.5% VAT but at the end of the quarter he can claim it all back again. Worst case is he has to cover the extra 2.5% out of his cash flow until the end of the quarter.

I'm not sure I'd pay for a car 100% until day of delivery though.....