VAT Scams You Must Be Aware Of

Thursday, 12. November 2009

VAT is about to increase as of 1^st January 2010. This means that there are going to be some very strange things happening between now and the end of the year in order to entice you to part with your dosh well in advance of your new car being delivered. If you are buying a new car for cash, that won’t be delivered until early next year, you may want to pay for the car in December in order to save some of the VAT. It is possible to do this as the tax point is the date that the invoice is raised which is the point in time when the dealer becomes liable for the VAT, so he will be very happy for you to pay upfront. However, there is still a chance that he may go bust which would cause you to lose all of your money and have no car. Of course the dealer won’t want to be liable for the VAT if you haven’t paid him as that could affect his cash flow. So the alternative would be to pay just the VAT as a deposit against the invoice. That way you only pay 15% and the dealer isn’t out of pocket whilst waiting for the car to be delivered to you. Better still I would pay the ‘deposit’ on a credit card. This will protect you if the dealer subsequently goes bust. The more dodgy situation will be with lease brokers who suggest that you pay the initial rental before the 31^st December by cheque payable to the broker. This can only work if the money is paid to the leasing company who will raise an initial rental invoice before 31^st December in order to charge just 15%. If it is suggested that you do this and you are happy to do so to save the VAT increase you should only make payment to the leasing company unless you really know the broker or the dealer if you have arranged your lease through the supplying dealer. By Graham Hill