VAT on new cars

tonym_dj

I've just read the latest newsletter about the VAT increase.

My girlfriend purchased a new car last weekend and was told the price would include an increase in VAT. I had questioned this because we were able to pay for the car in full before the VAT increase date.

We were told that we were unable to pay for the car in full as it doesn't yet exist and they would only take a deposit.

She paid the deposit and were told the car would be delivered at the end of March.

Am I right in thinking that we should have only paid 15% on the deposit and that we could have paid in full or if not have paid for the vast majority to make a VAT saving?

Thanks for you help
Antony

JasonLVC

There was nothing to stop you paying a 90% deposit at 15% VAT rate and then paying the remaining 10% in March at 17.5%.

This whole 'cant charge you as care doesn't exist' is rubbish, if that was the case, why are they charging VAT on the deposit - a deposit for something that doesn't exist?.

Tax points are the key. A tax point is created when an invoice is raised or money recevied. A tax point sets the date VAT is due/paid, hence if you pay 90% deposit, the dealer has to declare VAT on that 90% at the prevailing rate. If that is December 2009, then that is 15%.

If you've been charged 17.5% on the deposit, you've been overcharged. The dealer may have been saying that the overall sale price will be at the higher VAT rate (less the deposit which would be at the lower rate) and you may have mis-understood.

Print this off and give dealer/salesman :-

http://www.hmrc.gov.uk/VAT/forms-rates/rates/rate-rise-guidance.pdf

Section 3 is where the interesting stuff is.

BenL

Maryins "beat the VAT increase" article advises:

http://www.moneysavingexpert.com/news/shopping/2009/12/vat-to-tise-in-jan-how-to-beat-the-hike

Q. Is it when you pay or receive goods that counts? A. The VAT rate's usually determined when you pay or a tax invoice is raised. So pay now but receive goods in 2010, and 15% is charged.



Yet there are complications. You could pay the higher rate if a VAT receipt's raised now but you take over six months to pay; or you try to pay now to beat the deadline when there's no chance of delivery for an age.


I think your car purchase comes under "no chance of delivery for an age"


and also

Q. What if you pay the deposit now and the rest in 2010? A. The deposit is charged at 15%, the rest of the balance depends on when the VAT invoice is raised. So if it's a big purchase ask the retailer to raise it before 2009 ends.


So your deposit should be at 15%

tonym_dj

Hi,

Thanks for your replies.

That's very interesting, I've looked over the receipt and it looks like the VAT is in fact 15% but they have added additional costs to increase the total by approximately 2.5% which is rather cheeky.

We went to a couple of different garages, the first being Fiat (for the 500 we purchased) and second a large BMW dealer for a Mini and they both gave us the same story about the VAT which is why we believed it.

She's so far paid about £1,500 deposit and signed a contract which has a breakdown of costs although it doesn't give a percentage break down for the VAT.

What would be the best tact to get this resolved with the garage?

Thanks
Antony

Premier_2

Be more concerned about handing over large sums of money before getting the car.

If the garage goes bust between you paying the money and delivering you the car, it won't be just the 2.2% extra you've lost!