Exactly, 20% of whatever AP you have to pay. Anything ordered after 1st July will consist of AP +20% VAT, however Motability claim that their changes should minimise the impact of the tax cost.
I wonder if IPT will form part of the advertised AP and therefore will be subject to further tax, when VAT is added. or It will be added afterwards in conjunction with VAT, thereby adding an additional 32% ontop of the AP or Its buried somewhere and we don’t know if were paying VAT on it. or We assume the advertised AP, has been adjusted correctly to include IPT, in a way it won’t be subject to further VAT. ???
Jeez man, I’m a bloody accountant and that made my head hurt
Currently, there’s a summation of costs which are added to the purchase price, which includes insurance and maintenance as well as allowances for costs like tyres and breakdowns. Then a prediction of future value is made and subtracted from the total costs. If that figure is less than the sum of 39 benefit payments, there’s no AP. If there’s a lump remaining that would be the AP. Well, that’s the over simplified theory anyway. Insurance would be an allocation of the total insurance cost for the scheme for 3 years. Which could be 1/910,000th of the total insurance cost. With IPT added, that insurance cost increases, with no regard to whether each vehicle requires an AP. Thus the insurance cost increases by IPT but that increase is not necessarily subject to VAT or excluded from VAT unless the car’s costs are such to require an AP. Outside of Motability’s odd tax situation, insurance isn’t subject to VAT, just IPT. In theory, that should extend to the scheme. However, when costs are combined in an all inclusive basis, it’s the charge to the customer which includes VAT, which means both insurance and IPT becomes subject to VAT as the calculations to exclude are too complicated for most to bother with. Therefore, it’s safe to say that the AP will be set in the same way and then VAT applied to whatever the required AP would be. So, as the calculation must include the full, taxed, insurance cost if that pushes the AP up, you will effectively be paying VAT upon the IPT in the same way you pay VAT on duties applied to fuel.
So in theory, IPT £value should be excluded of VAT in the initial AP and VAT added afterwards (payed by the customer) or it would be illegal?
