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Dear All

I have ordered a 2.0T Q5 back in July with expected delivery in March 2011.

I did know back then that delivery will be in March and that i'd have to pay VAT at the increased rate of 20%. I still went ahead with the order for 2 reasons:
1- I didn't need the car before March 2011, as it's a birthday present for may wife, whose birthday nicely coincides with the March 11 registration.
2- The discount on offer was a good one at 8.5% (which was very good back in July)

I have now been advised by the dealer that they would be happy to raise a VAT invoice at 17.5% (Saving me ?750) if i can make full payment for the car before 4th Jan 2011. My order status is (build week 2) which means expected delivery end of February.

What do you guys think?! Shall I go for it and pay the full price 2 months before i can even see the car to save ?750. Or wait and for out the extra. The dealer i am buying from is part of a large group (Mercedes, Audi, VW, Skoda, Smart....) and they'll allow me to pay 15% of the price on a credit card.

Your input would be appreciated.

PS I didn't name the dealer as i am not entirely sure about forum rules on this, but he's a reputable authorised audi dealer in a big city
 

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I would pay it if you can and forego paying the extra vat
 

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I would pay it if you can and forego paying the extra vat
+1

I tried to do that when I ordered my car in Dec 09 for an April 10 delivery (to avoid the rise from 15 to 17.5%).

My garage wouldn't do it - I'm not entirely sure it is entirely within the HMRC rules (I think the car has to be in the UK to qualify?), but if you can get it - go for it.

You need to factor in the lost interest on your capital, but that will be minimal with the crap rates around at the moment?
 

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When I was canvassing dealers in October, I found that some would allow payment before 4th January to avoid the VAT increase others would not. I ordered through a dealer who would allow me to pay in full early, so saving about ?800, which as pointed out cannot equal any interest I would earn on that money. Tome the risk I have taken is that the company goes bust. But don't fully know the ins and outs of that. But my payment is against a specific ordered cat to a certain spec. If the dealer cannot supply that then that is his problem to rectify. Anyway you would have to pay in full before they allow you to drive away so that problem always exists whenever you pay. I would pay up and save the money.

My dealer, part of the Synter group, said that the money had to be physically in their bank account by the 4th January. I believe there was also an article in the Dec(I think) issue of What Car about this which basically said if you pay before the VAT rise then that is acceptable.
 

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Discussion Starter · #5 ·
Thank you all for the replies.

The What car article states that if you pay enough funds to cover the vat (as the dealer needs to raise vat invoice and pay the vat before Jan 4th) then you should be able to secure the 17.5% rate. My dealer will have none of this, they wanted the full amount upfront. I suppose they are thinking that since the vat is paid then this is a done deal, and wanted full payment.
 

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Thank you all for the replies.

The What car article states that if you pay enough funds to cover the vat (as the dealer needs to raise vat invoice and pay the vat before Jan 4th) then you should be able to secure the 17.5% rate. My dealer will have none of this, they wanted the full amount upfront. I suppose they are thinking that since the vat is paid then this is a done deal, and wanted full payment.
The subject of VAT timing and payment are two seperate subjects. I will try to explain.

Firstly, any business can elect when it wishes to have it's VAT tax point. Typically these are:

1. Date of order (often used by distributors selling large value items where import duty is payable - allows maximum offset time).
2. Date of invoice
3. Date of production
4. Date of installation
5. Date of shipment (often used by mail order companies)
6. Date of product acceptance (quite often used by software companies).
7. Date of payment

Which you choose is dependant on the company activity but once this has been agreed with HMRC, except in exceptional circumstances it cannot be changed. Therefore you need to know how the garage pays it's VAT.

Obviously if the company creates a VAT invoice which determines a payment to HMRC then they must pay HMRC at their next VAT point the full amount due. Payment dates and terms are again negotiable with HMRC but would normally be monthly or quarterly. If the VAT sum is not received by the customer prior to the payment to HMRC the company is 'out of pocket'. This is why they will require the money prior to this date.

Therefore, in order to pay the VAT the garage will require the VAT amount to be paid prior to this date.

Secondly, there is the question of full payment for the item. This is a complicated area because it could infringe on the law regarding credit agreements, but in general the garage could give you a zero percent loan against the vehicle until delivery.

Thirdly, there is the distribution agreement within which the company operates. Like VAT payments this will have been negotiated and will determine when the company has to pay the manufacturer.

Typically for a garage payment would be due on one or more of the following:

1. Payment upon order or part payment upon order
2. Payment before shipment of product
3. Payment after product received and accepted
4. Payment once customer has paid.
4. Payment before passing ownership to customer

Obviously, the company would not want to be 'out of pocket' on it's liabilities to Audi. and therefor would require you to pay at least in line with the terms of the Distributor Agreement'.

To summarise.

The garage can produce a VAT invoice providing it falls within it's current terms with HMRC prior to January 2011 @ 17.5%. What you pay and when yo pay to the garage is down to negotiation between you and the garage. This is NOT something to negotiate with a salesperson!! I would talk to the finance director.

Hope this helps
 

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From Audi UK

Sent: 06 October 2010 10:29
To: Heads Of Business; Sales Managers
Cc: Accountants; Audi Sales Admin; Centre Admin Supervisors
Subject: VAT Increase to 20%
Importance: High

With effect from the 4th January 2011 the standard rate of VAT increases from 17.5% to 20%

There are an increased number of customers that have asked if they can pay for their vehicles prior to the 4th January 2011 to secure the lower VAT rate even though we will not be registering and or delivering their new vehicle until after the 4th January 2011.

HMRC have confirmed that we are able to do this however to ensure we don't incur a 2.5% anti forestalling charge then the following must be strictly applied.

1. The VAT inclusive price of the goods must fall below ?80,000 - in the case of fleet orders received then this is a group threshold not an individual centre limit i.e. Greggs could order and pay for 4 vehicles at ?20k at one centre only i.e. not 4 at each centre equating to 16 vehicles across the group.

2. This arrangement excludes all finance and leasing company deals

3. This arrangement excludes supplies to any connected parties of the business (i.e staff and relatives of employees).

4. This arrangement only applies to vehicles that are deliverable by no later than the 31st May 2011 - if you are in any doubt as a result of accuracy of build dates then do not offer this facility to your customer as they will incur a 2.5% supplementary charge. All customers looking to avail of this should have the potential additional 2.5% charge fully explained to them in full prior to making any payments. In due course I will communicate an amendment to our standard terms and conditions for the customer to sign that will state that they will be liable for the additional 2.5% charge if all our terms and conditions are not met.

To qualify:

1. The customer must pay for the vehicle in full via bank transfer prior to close of business on Thursday 30th December 2010 - we will not accept any other method of payment due to the audit trail that HMRC will require. As part of the bank transfer the customer must quote registration details as a reference if known or their name and vehicle model.

2. In the case of a new vehicle and dependent upon its current status it is imperative that the sales price is agreed and signed off as correct by sales manager and or dealership accountant prior to advising the customer of the balance to pay. Again to re-iterate to qualify it must be the full outstanding payment that is taken.

3. The customer must sign a disclaimer stating that they will be liable for the additional 2.5% charge if all of our terms and conditions are not complied with and or do not pass HMRC scrutiny prior to making payment.

3. Once cleared funds have been confirmed an invoice with a tax point date of December 2010 will be generated via sales ledger not VSB and issued to the customer at a VAT rate of 17.5% - this sales invoice will be held on the balance sheet and deferred until point of registration.

4. On the provision that the vehicle is deliverable prior to the end of May the vehicle will be registered and invoiced in 2011.

5. At point of registration the vehicle will be invoiced via VSB at the old rate of VAT which by this time will be 17.5%.

Should you have any customers wishing to pursue this avenue then your first point of contact should be your dealership accountant. From an audit trail perspective any customers that do proceed on this basis then it is the centres responsibility to ensure that the sales transaction file contains the full audit trail to satisfy HMRC's requirements. If any gaps in the audit trail are identified then the centre will be charged a 2.5% supplementary charge pending HMRC approval.
 

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From Audi UK

Sent: 06 October 2010 10:29
To: Heads Of Business; Sales Managers
Cc: Accountants; Audi Sales Admin; Centre Admin Supervisors
Subject: VAT Increase to 20%
Importance: High

With effect from the 4th January 2011 the standard rate of VAT increases from 17.5% to 20%

There are an increased number of customers that have asked if they can pay for their vehicles prior to the 4th January 2011 to secure the lower VAT rate even though we will not be registering and or delivering their new vehicle until after the 4th January 2011.

HMRC have confirmed that we are able to do this however to ensure we don't incur a 2.5% anti forestalling charge then the following must be strictly applied.

1. The VAT inclusive price of the goods must fall below ?80,000 - in the case of fleet orders received then this is a group threshold not an individual centre limit i.e. Greggs could order and pay for 4 vehicles at ?20k at one centre only i.e. not 4 at each centre equating to 16 vehicles across the group.

2. This arrangement excludes all finance and leasing company deals

3. This arrangement excludes supplies to any connected parties of the business (i.e staff and relatives of employees).

4. This arrangement only applies to vehicles that are deliverable by no later than the 31st May 2011 - if you are in any doubt as a result of accuracy of build dates then do not offer this facility to your customer as they will incur a 2.5% supplementary charge. All customers looking to avail of this should have the potential additional 2.5% charge fully explained to them in full prior to making any payments. In due course I will communicate an amendment to our standard terms and conditions for the customer to sign that will state that they will be liable for the additional 2.5% charge if all our terms and conditions are not met.

To qualify:

1. The customer must pay for the vehicle in full via bank transfer prior to close of business on Thursday 30th December 2010 - we will not accept any other method of payment due to the audit trail that HMRC will require. As part of the bank transfer the customer must quote registration details as a reference if known or their name and vehicle model.

2. In the case of a new vehicle and dependent upon its current status it is imperative that the sales price is agreed and signed off as correct by sales manager and or dealership accountant prior to advising the customer of the balance to pay. Again to re-iterate to qualify it must be the full outstanding payment that is taken.

3. The customer must sign a disclaimer stating that they will be liable for the additional 2.5% charge if all of our terms and conditions are not complied with and or do not pass HMRC scrutiny prior to making payment.

3. Once cleared funds have been confirmed an invoice with a tax point date of December 2010 will be generated via sales ledger not VSB and issued to the customer at a VAT rate of 17.5% - this sales invoice will be held on the balance sheet and deferred until point of registration.

4. On the provision that the vehicle is deliverable prior to the end of May the vehicle will be registered and invoiced in 2011.

5. At point of registration the vehicle will be invoiced via VSB at the old rate of VAT which by this time will be 17.5%.

Should you have any customers wishing to pursue this avenue then your first point of contact should be your dealership accountant. From an audit trail perspective any customers that do proceed on this basis then it is the centres responsibility to ensure that the sales transaction file contains the full audit trail to satisfy HMRC's requirements. If any gaps in the audit trail are identified then the centre will be charged a 2.5% supplementary charge pending HMRC approval.
Thanks for this, you have saved me ?900 vat, paid today , delivery in March 2011.
 
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