Pay extra for 10 Reg?

[Clingy]

The dealer has phoned to tell us my wifes new car arrives anyday. So we thought it might be worthwhile waiting for the new 10 reg in 1st March. However we ordered last year and as such, as long as car is delivered before 1st March, we do not pay the extra 2.5% VAT (amounts to about £250). Now we dont intend selling the car (we will probably keep it at least 5 years and probably longer), so is £250 worth it for the extra bragging rights of a 10 reg?

What would you do if it was your money/decision?

[stavroshamster]

Personally, I would save the £250 and use it for something more useful.
Just can't see the point in getting a 10 rather than a 59, its not like anyone is going to care in a couple of months anyway.

[b0redom]

I'd have gone for an '08 and saved myself about £4k.

[matty-hodgson]

Wait until the first of march and be one of them smug-arsed gits that drive about in their "brand new, '10 car".

[eshrules]

Wait until the first of march and be one of them smug-arsed gits that drive about in their "brand new, '10 car".

awfully bitter aren't we?

[Saracen]

There are a number of aspects to this, and they aren't all straight-forward.

Firstly, when you ordered the car is irrelevant in terms of the amount of VAT. What matters (most) is when the tax point is. And that isn't entirely straight-forward.

There are a variety of VAT schemes, like the standard accrual basis, or cash basis, or several retail schemes, and even some custom schemes. Which one your dealer uses is the first critical point, and it's most likely to be the standard accrual.

If so, then the critical date is most likely to be the date at which the car is invoiced. Not when it's ordered, or when it's delivered, but when the invoice is raised.

The next important point is whether, when you ordered or at some subsequent point, you paid a deposit. If you did, then the date of the deposit is important, because that may well be what trigger the "tax point" and that is what determines the rate of VAT you pay. If that tax point is on or after January 1st, then VAT will have gone up to 17.5%.

Then comes the last complication.

The price the dealer charges you, in total, does not have to change when the VAT rate goes up. What they pay in VAT, however, is determined by HMRC rules. They can choose to absorb the VAT rise themselves, and if they do, then they VAT will have actually gone up, and must be shown as such on the invoice, but the price to you doesn't.

For instance, suppose I (if I were a dealer) sell you a car for £8695.65 plus VAT (@15%). That's £10,000 including VAT.

But now the rate has gone up to 17.5%. So the car should now be £10,217.39, with the difference being the extra VAT.

I could still elect to sell you the car at £10,000 but it will then be £8510.64 plus VAT (@17.5%).

In other words, HMRC get to set the VAT rate and the date at which it applies, but I get to decide how much to sell the car for. Some dealers, and a lot of stores, have decided to hold (VAT-inclusive) prices at pre-rise rates, but they do it by accounting for and paying the extra VAT out of their profit margin.

I don't know the in's and out's of the car trade, but it might be worth enquiring if the dealer can and/or will register the car after march 1st, IF you pay for it before that date, to qualify for any deals they have going. Because it seems to me that that 1st March date is one imposed by the dealer or manufacturer, and not anything to do with HMRC.

I wish I'd seen this thread a couple of hours ago - I had a VAT inspector here doing a VAT audit on me. I'd have asked her directly.

[[GSV]Trig]

Ot but out of interest, what are the midyear cars going to be called?
We had 09/59 so if its going to be 10 what they going to call the others..

[schmunk]

Ot but out of interest, what are the midyear cars going to be called?
We had 09/59 so if its going to be 10 what they going to call the others..

6x

[[GSV]Trig]

6x

yeah but then what happens next year?

[Rob_B]

Well what is the price difference between two identical cars, one a 'year' younger than the other? I'd imagine on a £10k car it'd be more than £250 (even after 5yrs?) So long term you might win by waiting (?)

[schmunk]

yeah but then what happens next year?

11 and 61.

[Zak33]

The manufaturers are subsidising the deal Saracen.. they pay the differece and he won't get it back unless he follows their rules. It's to get the registrations in early and it got people to sign up last year and not wait to order.

Clingy.. in short. If yuo keep the car under 3 years, you'l get the £250 backin increased residual value: definately.

If you keep it 3-4 years it;s marginal.. over 4 years it won't make a pennies worth of difference.

So.... short cycle car.. go 10 reg.
Long cycle car, get the £250 off

[Clingy]

Thanks Guys....car was ordered in November and deposit paid. I don't know the VAT ins and outs and am relying to a certain degree on the (respectable) local dealer. It also happens to be the dealer where we get most of our company cars. They explained that if deposit paid before 1st Jan they have two months in which to deliver at the old rate. I believe this to be true as my double glazing order is following the same agreement.

I shall push them for a best of both worlds solution.

I am surprised (or have I misunderstood) that Matty sneers at the qudos of having a 10 reg? I must be a shallow person, because I would take pleasure in being one of the first to have a 10 reg as I do about having the latest phone or seeing the latest film or software, games, fashion yada yada. However I don't think my wife is so shallow, she tends to base things upon purely financial and practical reasons, so I recon she'll take Zak's advice .

BTW car is a new model Polo (yet to see one of the road) 1.6 TDI and is being bought with the aid of the scrappage scheme. Wife is scrapping an R Reg Polo she bought from the same dealer new 12 years ago. Nowadays she does 20K miles a year.

[Zak33]

1.6 TDI Polo

Hope her license is clean (at the moment)

[Saracen]

The manufaturers are subsidising the deal Saracen.. they pay the differece and he won't get it back unless he follows their rules. It's to get the registrations in early and it got people to sign up last year and not wait to order.

That's pretty much the conclusion I reached, though I hesitated to stipulate it absolutely as the case.

From what Clingy said, ....

However we ordered last year and as such, as long as car is delivered before 1st March, we do not pay the extra 2.5% VAT

.... it certainly sounded as if the dealer was suggesting that it's the HMRC rule that determines the "VAT at old rate". It is certainly true that HMRC does indeed stipulate when the rate charged has to be increased and when it doesn't, and it's a fairly complex set of rules. Put it this way, their explanation to VAT registered businesses (like me) is 45 pages long, because while the basic rules apply to most, there's all sorts of exceptions, some of which are at the businesses discretion as to how they do things, and some aren't.

What it boils down to though, is that what businesses must follow those rules in how they actually account for VAT and if the rules say it goes yup, it goes up, in what they have to pay to HMRC in their role as unpaid tax collectors. And, clearly, the invoices must reflect the rate actually paid, because some of those paying it can reclaim it (though not usually if you buy a new car, dammit).

It is, of course, for businesses to interpret those rules in the way that suits their commercial imperative providing that comply with the rules. For instance, I can accept an order in September, invoice on 31st December and the 15% VAT rate applies. If I'm on the standard quarterly accrual basis, then at the end of the quarter in which that invoice date falls, I have to pay the VAT to HMRC and they really don't much care if the customer has paid me. So, if my quarter ends on 31st January, that's the date that triggers the VAT return being due, and payment being made. I can supply is March or April, and get paid then, but meantime, it's my cashflow that is subsiding the payment of VAT in advance.

Note - the above is based on the standard assumption that the invoice date is the tax point, and that is usually the "date of supply" and that is the critical point for VAT to be triggered. However, there are special provisions for all sorts of things, like continuous supply contracts, like extended contracts where order and supply are a long way apart, and as a wrinkle, where a deposit or part-payment is made on such a contract, as with a deposit on a car.

As I say, I'd assumed it was either a dealer or manufacturer subsidy of some sort making this arrangement, and that it was for pretty much the reason you gave. I don't know the car business, and you do, so I gladly accept confirmation of what I suspected.

My reservation was that we way Clingy put it makes it sound like the dealer is suggesting that not being able to register in March is down to HMRC rules and that 1st March cut-off date, and as I read HMRC rules, that isn't the case. However, though I'm VAT registered, and an accountant by training, it was a very long time ago that I actually did any accountancy professionally and I only really follow VAT rules as they apply to me, so the 1st March thing might be buried in the rules somewhere, perhaps specifically in relation to the car trade. I don't think so, but it's possible.

More likely, as you say, it's a manufacturer offer and, indeed, to get the offer you have to follow the terms of the offer. If that offer stipulates registration before March to qualify, then that's that .... providing the buyer understands that it's the manufacturer offer determining that and blocking the later registration, not actually anything to do with VAT or HMRC.

Unless I'm wrong and that date has snuck in somewhere, and I wouldn't rule that out entirely, then blaming it on VAT is a bit of a smokescreen. What the dealer should be saying is that to get the manufacturer subsidy, which happens to be the amount of the VAT increase, the car has to be registered. But if so, it isn't a VAT issue at all. Of course, that might be what the dealer is saying, because it's a subtle difference, but from the way Clingy explained it, it seemed that either the dealer isn't saying that, or he misunderstood quite what the block to later registration was.

It just seems a bit like the other recent thread about using Health and Safety, or Data protection etc as a convenient excuse - if you say "VAT rules don't allow it", people tend to mutter about it but accept it. It's sounds like it's just a bit disingenuous. It's easier than blaming it on the manufacturer's offer.

Not that it matters much. Whether it's HMRC applying the cut-off date or the manufacturer applying it, it's still a cut-off date.

[Zak33]

a quid for anyone who can read all that and not die of boredom