Don't get caught in the VAT trap

* VAT increases on January 1 * HMRC offers muddled advice * How to save money...

Don't get caught in the VAT trap
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What Car? Staff
29 Oct 2009 16:57

Worthless advice from the Government could have cost a What Car? reader 600 in extra VAT.

Despite being given a delivery date of mid-to-late November, the buyer was worried that the delivery of his Volkswagen Golf was slipping into 2010.

Concerned that he could be exposed to 17.5% VAT, instead of the current 15% (which is due to expire at the end of the year), he called the HM Revenue and Customs' general enquiry line.

They incorrectly told him that by paying a deposit in 2009, he would be liable for VAT only at the current rate of 15%.

The buyer then called What Car? to ask if we could confirm the Government department's advice that he'd be safe from any increase in VAT.

What Car? steps in
We contacted the Revenue and Customs press office which, instead, confirmed that the buyer would have to pay VAT at 17.5% if the balance was paid in 2010, equivalent to nearly 600 extra on the bill for his high-spec Golf GTD model.

The buyer called the general enquiry line back to check and they admitted he had been given incorrect advice.

Volkswagen also confirmed that demand for the new Golf, and the high specification of the buyer's car, had caused the delay, but VW is now confident it can deliver before the end of the year to avoid the increase in VAT.

Volkswagen has, in any event, decided to reduce the cost of cars ordered before November this year, but delivered up to the end of February, by 2.5% so customers won't get stung.

What should you do?
If you want to avoid paying the higher rate of VAT on a car ordered before the end of the year, you will have to clear the balance before December 31.

Ask for a delivery date to be written into your contract when you pay a deposit on the car, so you can take the dealership to task if it doesn't deliver.

Pay for at least part of the deposit on your credit card and you will also get added protection under section 75 of the 1974 Consumer Credit Act. If a dealership subsequently fails to deliver your car by the agreed date, you can pursue your credit card provider for the money back.

Even if just 1 was paid on the credit card, you are protected for goods costing up to 30,000, no matter how the remainder was paid.