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Hi Myself33
You ordered and payed deposit prior to the possible up coming VAT increase. It will remain as ordered. If you have taken out any credit towards the car, that more than likely show an increase in VAT
Thanks for the advice, I really do appreciate the help the friendly advice from the forum members here ?
https://realbusiness.co.uk/vat-increase-how-what-when-who
Look in the “what should I do section” from 3rd paragraph down. Its outdated but the principles are the same.
Thanks , that paragraph
“As long as the customer has taken away (or you have dispatched) the goods to them before 4 January 2011, your sale is considered to have taken place before the change”
reads to me, if I have not fully completed the transaction, take the car before a vat increase , I would have to pay extra vat ?
If a vat increase is announced in the budget next week, and my car came after the increase , would I be liable for the extra vat? even tho I have signed a contract and paid a deposit at current vat rate. Thanks
The same question has crossed my mind as well, as a new car that I am buying for one of my daughters has just arrived in the U.K. and we should be taking delivery next month. The Chancellor is saying that “everyone will have to pay more tax” and as a lot of people don’t pay income tax, that does rather point to VAT. I guess it would also help inflation, if not the cost of living crisis!
Part of the reason that I ordered the car at the end of September was that I was concerned that if the manufacturer applied an inflationary price increase it could add a few grand to the cost of the car. I specifically asked the dealer what would happen if there was a price increase prior to taking delivery, and he assured me the price that we agreed, including the negotiated discount, was guaranteed. I guess they could argue that VAT is a separate tax that is beyond their control, but I would still expect them to honour the price that we agreed, given that the price that we shook hands on wasn’t an ex-VAT price, it was including VAT. I would anticipate them trying to pass on the extra tax though, as it would probably wipe out any profit they make on the car.
The rate of VAT is that which prevails when the goods legally change hands. I don’t think the dealer would have any choice in the matter. He just collects the tax on behalf of HMG.
The rate of VAT is that which prevails when the goods legally change hands. I don’t think the dealer would have any choice in the matter. He just collects the tax on behalf of HMG.
I’m sure that’s correct, but I’d hope that a good dealer wishing to maintain both sales and good will would, at the very least, meet the customer half way with any additional cost and take a bit of a hit on margin, but that might be wishful thinking!
I can’t remember when VAT previously increased from 15 to 17.5% whether or not we had any advance notice or whether it was immediate. If it’s from 1st Jan we might just be lucky! Of course, it may not happen at all and we can just worry about all the other tax increases or effective increases through frozen allowances etc ?
@Glos Guy It went from 17.5% to 20% I think in Osbournes 2010 emergency budget and not that long before that from 15% to 17.5% again if I remember right it was all so Osbourne.
How I understand it-any deposit paid is charged at the current VAT rate. any balance owed is paid at the current VAT rate at the time of taking ownership of the goods. Any credit taken out is also paid at what ever the VAT rate at the time of your first payment.
Thanks , that paragraph “As long as the customer has taken away (or you have dispatched) the goods to them before 4 January 2011, your sale is considered to have taken place before the change” reads to me, if I have not fully completed the transaction, take the car before a vat increase , I would have to pay extra vat ?
Basically yes. Any deposit paid if I remember rightly is based on the VAT rate at the time and the balance due would based on the VAT rate at the time of collection.
I did read earlier cabinet members were saying he is not going to increase VAT but take that with a pinch of salt.
If you take the base price of your car before any Vat is added, it would be easy to play around with the VAT rate and work out what the VAT would be at 20%, 22.5% etc. Then add it to the base rate of your car.
To do this you would divide the VAT rate by 100 to make it a decimal. Then you need to multiply the VAT rate by the base price (excluding VAT)
For example if your car is £22k ex VAT and the VAT rate is 20% it would be worked out as follows
20/100=0.2 x 22000=£4400 So the car would cost £22000 + £4400VAT=£26400 on the road inc VAT.
If the VAT rate was 22.5% :
22.5/100=0.225 x 22000=£4950 so the same car would cost £22000+£4950VAT=£26950 inc VAT
If the VAT rate was 25%:
25/100=0.25 x 22000=£5500 so again the same car would cost £22000+£5500VAT=£27500 inc VAT
Thanks kezo much appreciated, there’s a fair chance I could have to pay increase in vat, :(, time will tell
@Glos Guy It went from 17.5% to 20% I think in Osbournes 2010 emergency budget and not that long before that from 15% to 17.5% again if I remember right it was all so Osbourne. How I understand it-any deposit paid is charged at the current VAT rate. any balance owed is paid at the current VAT rate at the time of taking ownership of the goods. Any credit taken out is also paid at what ever the VAT rate at the time of your first payment.
Can you (or anyone else) remember if the previous VAT increases came into effect from midnight on the day they were announced (like they do with things like fuel & alcohol duties), or from a date in the future (like they do with tax allowances etc)? The latter approach allows people to plan ahead, but the former avoids short term demand surges to ‘beat’ the rate rise which, with inflation being the priority at present, I can see being the preferred option.
OK, I’ve done a bit of Googling and can now answer my own question. With the previous two VAT increases (15 to 17.5% and 17.5 to 20%), the change was announced in the budget and took effect from January the following year. Although we aren’t in normal times at present, so anything could happen, my sense is that any increase won’t happen overnight and will take effect from January. On that basis (with my daughters new car due in 3 or 4 weeks time) I’m hoping that we may dodge a bullet!
As far as I remember contract law, specific goods have to be allocated and payment made, so it’s not essential that the car would be handed over by the 1st Jan (if that was to be a change date) if the buyer was willing to pay before delivery at the old VAT rate.
I don’t know the VAT rules but I’ve read time and time again about what they call the car luxury tax that’s an extra tax put on car sales over £40,000.
People are being hit by this tax because of the long delays in delivery of there cars where when they ordered the car and the on the road cost was £38,500 and over the time before delivery the manufacture has increase the retail by £2,000 bringing the car into the luxury tax bracket.
The taxman being the taxman has also made it impossible to avoid this tax because even if the dealer gave you a big discount taking the price down below the threshold DVLA, taxman and manufacturer agree the retail price between them and the customer pays the tax agreed between those bodies if the price goes above the threshold set and is paid at the retail price on the day of delivery not when the order contract was signed or the price agreed at that time.
Let’s hope the little Hunt don’t bring those rules into VAT this week. ?
@Glos Guy if unt up’s the VAT rate, I reckon it will increase at 12am on January 1st next year.
I was VAT registered from early 1990’s to 2015. If the VAT rate increased during a job, the customer if they asked to pay for the work already carried out at the current VAT rate I would allow it and in many respects invoice for more if they were willing so they were charged less at a higher rate of VAT on completion of the work. A customer would often provide a nice tip at the end as cash in hand.
It was not in my interest to do this as I could claim more VAT back at the increased rate, if they were billed on comletion. Most of my work was was to local authoritis/NHS and emergency services so it didn’t matter as they could also claim VAT back. Private customers were the ones affected so would be willing to bill x amount early.
Now take a greedy car dealership. It would be in their best interests to charge at the higher VAT rate as they could claim more back, as shown in my reply to @myself33.
There is no harm asking the dealership to play with their figures and issue/amend your invoice once warning has been given on what/if the new VAT rate will be, so you end up paying no more then when you signed on the dotted line. At the very least they could meet you half way and split the difference, but these are dealerships we were talking about.
The dealer has contacted me today to say that the car is now due with them next week, so as long as any VAT increase doesn’t come into effect immediately we should be OK.
It could be just 9 or 10 weeks from order to delivery, which is impressive in the current climate, especially as the car has a lot of ‘chip heavy’ features, which are being used as excuses for delays by many manufacturers.
Great news @GlosGuy
Its also worth mentioning that any mention of VAT we have heard, may not based on upping the rate. They could hold or lower the threshold on what small to medium businesses can earn before having to qualify as VAT registered, rather than increasing it in line with inflation. This would bring a substantial amount of revenue in.
Although, the chancellor did say everyone will have to pay more tax, they only way “everyone” will pay more tax, is through vat increase
When he said “everyone” it could mean everyone working, everyone earning over x amount, everyone lving on top of a hill etc. The term “everyone” is as broad as the day is long and can mean many things. Whils’t I do not think the VAT rate will be increased, rather more of an income tax increase, but I don’t know and neither do the press/media at this stage.
We will soon learn what they have planned, but please don’t let it worry you or distract from your new car 🙂
even if he increases vat which i doubt there are two points:
1. he cant back date it so the earliest it could happen is the day of the budget statement just like the fuel duty or booze duty it goes up at midnight that day.
2. if your garage invoice you for the car it is applicable at the rate effective on the date of the date of supply ie invoice date.
Just back from the dealers. Great news all round. The confirmed part-ex had gone up £260 from the already high indicative price that we were given in September. And as that’s on top of a discount of just over £2k that we got off the car, I’m very happy.
As for the potential VAT increase, the dealer has told me not to worry. With the car already built and in the country, if the rate goes up they can register it before we pick it up and avoid any increase. He has assured me that even if the rate goes up on the day of announcement, I won’t pay any more than we have agreed. Very impressive service all round.
Just back from the dealers. Great news all round. The confirmed part-ex had gone up £260 from the already high indicative price that we were given in September. And as that’s on top of a discount of just over £2k that we got off the car, I’m very happy. As for the potential VAT increase, the dealer has told me not to worry. With the car already built and in the country, if the rate goes up they can register it before we pick it up and avoid any increase. He has assured me that even if the rate goes up on the day of announcement, I won’t pay any more than we have agreed. Very impressive service all round.
Great news 🙂
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