Buying a brand new car vs. VAT Tax hike - info request!

Jesthar

Asking this one one behalf of a friend. She's looking to buy a brand new car (I know, I know - no telling some people ), but VW can't deliver on that particular make/model/spec until January.

Question is simply this: would she have to pay the extra VAT for the car due to it being delivered/registered/taxed in the new year, or would that be determined by whether she paid for it this year or next?

Thanks, people!

~Jes

harveybobbles

Offer to pay for it now, as per the Order Form...

Gloomendoom

I think that might be a risky strategy. The dealer could go bust between now and January.

vikingaero

OK minimise the risk then and pay on 31st December.

Kilty_2

Gloomendoom wrote: »

I think that might be a risky strategy. The dealer could go bust between now and January.

I doubt VW are in the habit of giving franchises to dealers that are at risk of folding any time soon.....

LeeSouthEast

In the deep recesses of my mind, VAT is payable at the time the invoice is raised, not at the point of payment?

motorguy

LeeSouthEast wrote: »

In the deep recesses of my mind, VAT is payable at the time the invoice is raised, not at the point of payment?

Thats not the way it worked with the last VAT increase at the turn of the year.

I 'bought' a new Passat in November but opted not to register it until the turn of the year, thus would have been liable for the 17.5% rate, however VW paid the 2.5% themselves for those people in that position.

I suspect they'll do the same this year too, but i guess there are no guarantees.

Gloomendoom

Kilty wrote: »

I doubt VW are in the habit of giving franchises to dealers that are at risk of folding any time soon.....

Car dealers do go bust... even franchised ones. I wouldn't want to risk joining the long queue of creditors.

LeeSouthEast wrote: »

In the deep recesses of my mind, VAT is payable at the time the invoice is raised, not at the point of payment?

I asked this question recently when a SEAT salesman was trying to get me to sign on the dotted line. He told me that there was a twelve week wait for delivery and that VAT was payable when the car was delivered, not when it was ordered.

Of course, he could have been lying through his teeth to get me to order the car asap.

property.advert

There is something about it having to be delivered in January to escape the increase but I don't know what date. In any case, new car dealers might work on a different VAT model to others as they effectively work on commission, as do travel agents etc.

Normally VAT would be liable at the point of invoice, not cash received. If they work on that method but give you say X days to pay or upon delivery, whichever is sooner, then you may escape it.

Crabman

Gloomendoom wrote: »

Car dealers do go bust... even franchised ones. I wouldn't want to risk joining the long queue of creditors.

Solution - pay a small part of the deposit via your credit card and benefit from Section 75 protection on the whole purchase value :cool:

http://www.moneysavingexpert.com/shopping/section75-protect-your-purchases#deposit

JasonLVC

For VAT, the tax point (the time at which the VAT is 'locked' and charged) is either :-

1. The supply of the goods (for a car, this would be the delivery date)

or

2. Receipt of payment (ie, payment is made in full on or before the delivery date)

So if you pay, in full, by 3rd January 2011, then the dealer has to account for VAT at the 17.5% rate. If you pay on or after 4th January 2011, then the dsealer will have to charge 20%.

So, if you can, pay in full before the VAT rate changes, or if you don't trust the dealer, pay as much as you can up front which will be at 17.5% and the remaining payment will be at 20% VAT.

So if the salesman says they can only charge VAT on delivery, they are wrong - but remember, we're talking about cash/bank loan purchases here.

If you are using manufacturers finance or other HP/PCP then the finance company will not release the funds for the car until it is delivered and so if you fit into that bracket, you can pay your 10% deposit which'll be at 17.5% but you'll have to wait until the car is delivered before the finance folks release the funds to the dealer which means you may have to pay the higher VAT rate.