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Owing VAT on car 18 months after purchase?

I privately purchased a used car 18 months ago and have today received the following letter from the dealer:

********** Tax Issue and your car

You will recollect that we had the pleasure of selling you a car. An issue has arisen concerning the amount of VAT we charged you. We believe that we charged you the correct amount, but Customs and Excise think that more should be charged. In order for Customs to increase the VAT they will be contacting you together with some of our other customers to ask some questions.

Put simply, we have to charge VAT on the cars we sell. We do not have to charge you VAT on key insurance if sold separately. When we sold you the car, we also supplied you with key insurance. We did not charge you VAT on that insurance. We believe that we sold you two distinct things: Firstly a car, secondly key insurance. If we are correct then no extra VAT is due.

Customs are trying to establish that we just sold you car with the insurance thrown in. If they were right, then we undercharged you VAT of 74.47. However, the whole thing boils down to what we agreed with you at the time. If our agreement was for you to buy two separate things, the tax was correct. If we agreed to sell you a car with insurance thrown in then more tax was due.

Customs will be contacting you to discover what you thought you had bought. We would ask you to answer accurately. If you simply cannot remember you should say so. Please do not guess an answer. Any answer you give will be relied upon. You may be required to explain your answer in a court of law.

We believe that the correct amount of tax was paid. We have no intention of sending you an extra bill. In order to maintain our low prices, we are prepared to go to court if necessary, although we hope that it will not come to that.

**********

I'm must admit that when I received the letter I couldn't remember anything about any 'key insurance' so I dug out the paperwork.

I've got a 'Guarantee Booklet' with some paperwork attached. The prime interest here was the 3 month guarantee on the used car. There's also a small section relating to the key section. It mentions a purchase price of

499 and one of the tick boxes says that I've had the benefit explained to me. I've signed the bottom of the proposal to say that I understand.

I paid for the car using Visa Delta. The nearest thing I've got to a receipt is a sheet entitled 'Insurance Products Validation Certificate'. Under 'Vehical Details' it has 'Purchase Price: 4999' which is what I paid. Under 'Cover Details' it mentions again the 'Key Insurance' with a claim limit of

500 and a price of 500.

Now personally when I go to a car dealer I'm there to buy a car. I'm not there to buy finance, insurance, warranties etc... If they want to give some as 'added value' to separate themselves from the competition then that's great. If I was told I was paying 500 for 'Key Insurance' I would have declined and saved myself 500. As far as I was concerned I was buying a car for 4999 and they are throwing in any extras as an incentive.

I'm with Customs on this one. However the wording of the letter seems to imply that the dealer may want to charge me for the excess VAT if it comes down to it. Where would I stand on this? Surely the deal is long done based on the price agreed with the dealer at the time and any issue now with VAT is their problem and not mine?

Reply to
Jonathan Lonsdale
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I'd have said that if a dealer messes up his vat return then it should be

*his* job to pay any vat due, rather than try and re-charge it to his customer.
Reply to
Adrian Boliston

Tell the truth and say you do not remember what you did or did not pay for, which to be honest cannot be taken one way or another... However if saying that will land you with a bill then say they sold the two things separately...

Domestos

Reply to
Dom

There is no VAT on insurance anyway, so what is the fuss about?

In any case, nobody would be daft enough knowingly to pay a £500 premium for insurance where the claim is limited to £500. This is obviously a scam of some sort, for which the dealer deserves to be strung up by the goolies.

Reply to
Ronald Raygun

"nightjar .uk.com>" How does 'We have no intention of sending you an extra bill' lead you to

In a similar vein to 'We have no intention of further redundancies...' :)

Nowhere in the letter does it say that they assume responspility for any additional VAT. They toss in phrases like 'We have to charge VAT...', '... we undercharged you...', etc.

Reply to
Jonathan Lonsdale

I think that's the point.

Dealer reckon's it's a sale of 4500 for a car and 500 for insurance. Custom's reckon it's a sale of 5000 for a car with bits thrown in.

Reply to
Jonathan Lonsdale

That is precisely what the fuss is about.

There is VAT due on the car sale. But if the dealer can pass off £500 of it as an insurance sale, there is no VAT due on the £500.

Reply to
Alex Heney

They don't have any choice in the matter.

Reply to
Alex Heney

I would imagine so. They probably carry out the same scam on all the cars they sell. Since this has been going on at least 18 months (probably a lot longer), that is 17.5% of a *lot* of £500s.

Reply to
Alex Heney

That's not advice, least not good advice. It's clear from the post that he won't get a bill as the duty is a matter between customs & excise and the dealer and the dealer clearly states he won't have to pay any VAT owed. He believed he was paying for a car with extras thrown in so he should be honest so that the crooked dealer doesn't get away with defrauding all of us who do pay our taxes properly.

People get away with being dishonest if honest people who know about it do nothing!

Reply to
Steve Frazer

18 months after you bought it I dont normally keep cars that long Totally his resonsibility you bought the car for a given ammount any buggering about with the vat is his problem shades of Arthur Daley
Reply to
TEAL'C

simple answer forward the correspondence to the local VAT office and tell truth you paid for the car as it was offered a t that ammount as an indevidual VAt 18 months after is not your responsibility

Reply to
TEAL'C

I didn't think there was Vat on second hand cars anyway? There is on new cars Surely Vat would greatly skew the market in favour of private deals rather than dealer ones.

Neb

Reply to
Nebulous

Identical to the stamp duty scam in the late 80's (when anything over

30,000 attracted stamp duty........yes, you *could* actually buy a house for that sort of money in those days).

Houses valued at 32,000 were all of a sudden being sold for 29,999 and the buyer and seller came to a private arrangement over the 2,001 difference, usually a cash jobby for carpets, curtains, ornaments, whatever.

Reply to
Chuckles The Scary Clown

Brelieve it or not the dealer has to pay the VAT on the profit makes their accounting Very interesting hence your dealers need to reduce the "Selling price"

Reply to
Tealc

Yes, many secondhand dealers can now use this way of paying VAT. Instead of charging output VAT on all sales and recovering input VAT on all purchases the dealer pays 17.5% of the difference between the purchase price and the sale price to C&E.

Selling the 'insurance' separately would reduce the VAT considerably and thus improve the dealer's profit.

Reply to
usenet

They can't avoid "responspility for any additional VAT", the customer doesn't really even 'see' the VAT and doesn't have any liability to C&E as I understand it.

Reply to
usenet

It certainly appears as though the dealer has been operating a scam in order to avoid paying VAT.

The tone of the letter suggests that the dealer is trying to "encourage" you to say to the C&E that the car and insurance were separate purchases whereas your actual recollection was that you were buying a car only.

Be honest, tell the C&E your recollection of events. If you tell the C&E porkies and get found out you'll be in hot water and anyway, why would you want to protect the car dealer?

You would not be liable for any more VAT, that's the dealer's responsibility.

sPoNiX

Reply to
s--p--o--n--i--x

Duh. Yes, sorry, I'm with it now.

Actually, there *is* a kind of quasi-VAT on insurance, it's called IPT (insurance premium tax) and is 5%. Did Messrs Daley account properly for this, I wonder?

Reply to
Ronald Raygun

It seems to me that the dealer is being investigated for "value shifting." In other words, C&E think the value being assigned to the Insurance element is too high. This is one of the reasons that C&E introduced the 17.5% rate of IPT for retail insurance, such as that sold in Dixons or Curries for electronic gadgets. It's also one of the reasons that they listed this type of avoidance scheme in the list of those that have to be notified to them by businesses using it.

You have no need to pay the dealer any additional money, and he's already said he won't seek any additional VAT from you. He is apparently looking for support for his case. I doubt that C&E will bother the dealer's customers, even if it goes to appeal.

Reply to
vatark

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