How to avoid the VAT increase of 2% due on new 2012 car.

I have already ordered a new car for january & agreed the price. In view of the VAT increase due from either budget day or Jan. 1st. next can I avoid paying the increase by full payment in advance of VAT whilst still not registering until 2012 ?

I'm just doing a VAT course at the moment and this issue came up.

I'm sure the garage can advise you also because they will come across this issue, but we were told that by paying in full before the VAT rate changes, you pay VAT at the rate when you actually hand over the money.

The car can still be registered next year, as originally intended.

VAT rate is as of the date of vehicle registration by my understanding.
The effect to you will likely be the vat increase on the difference between new car and trade in.
Dealer may absorb the increase.

I would not rule out an increase in VRT with a widening of the bands.

Look like I could have been caught in a double trap if VAT & VRT increases are imposed on top of the price already agreed. To make matters worse I did not trade in so the extras will be onto the full purchase price. Will try to sort things out on monday but if I back out I may have trouble getting my deposit back. Interesting scenario ahead & there must be others in the same situation. Just hope that JoeRoberts has it right this time.

Bikeworld in Dublin have made the decision to absorb the VAT increase - customers can order a new bike now, collect in January and pay the pre-increase price.

You might find that other vehicle dealers do something similar.

http://www.bikeworld.ie/facebook-social.html

battyee said:

Look like I could have been caught in a double trap if VAT & VRT increases are imposed on top of the price already agreed. To make matters worse I did not trade in so the extras will be onto the full purchase price. Will try to sort things out on monday but if I back out I may have trouble getting my deposit back. Interesting scenario ahead & there must be others in the same situation. Just hope that JoeRoberts has it right this time.

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It may be worth your while to see what other stuff is happening with the Budget on 6th December. With all the other taxes and charges coming in, you may decide that a new car might not be the best idea.

JoeRoberts said:

VAT rate is as of the date of vehicle registration by my understanding.

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The person running our course worked for Revenue for years and actually wrote quite a lot of the legislation. He was adamant that the VAT rate applicable on an advance payment is based on when the payment is actually received. In order to avoid the increased VAT rate in January, full payment would need to be made to the garage by 15th December.

The garage is obliged to issue a VAT invoice within 15 days of the end of the month in which the payment was received. If this is done in November or December, then the rate will be 21%.

As I said, the garage would be well used to this kind of thing occurring and would be the best people to talk to about it.

I would have thought that given the deposit is not refundable, it agreement to a contact and a given price that the dealer cannot apply the 2% VAT rate change to an agreed price? Not a lawer but would like to know if this is the case!

The vat increase is not starting on Jan ist apparently.
So you are likely to have a month at least to get any car updates at old rate.

It would be great if the increase came after Jan 1st. but the media view is that Vat rate of 21% will finish at end of December. Hope you are right but douibt it.