When do dealers pay for the car

[Scottie]

I've been thinking about when the VAT rate is changed back to 17.5%

Anyone know when a dealer actually pays for a car that they get from Mini UK.??

Obviously I am aware that VAT is applied to whatever happens first i.e payment or invoice so if I wanted to get myself a new car is say January or February as long as I pay for the car in full prior to the vat change I will only pay the 15% but can ask for the car not to be built until January onwards that way avoiding the 2.5% increase.

What I was wondering about what VAT rate will be applied to the cars that are built and at the dealer prior to January but not sold until January onwards. I guess it will depend on when the dealer is invoiced from Mini UK are all cars MINI UK owned until they are sold or do dealers pay for cars as they arrive at their garage whether sold or not??

[Sheilz]

I bagsie your alloys :thumbs up:

Seriously I can't help VAT and stuff is a mystery to me. Just know that my other half pays his VAT once per year couldn't even tell you if it coincides with anything specific like his end of year figures.

[KenL]

I think the dealer will only pay VAT to the government, it won't go near MINI. In other words, MINI will supply car to dealers VAT free. The VAT is only collected from the consumer and then passed on. This is just like trades people buying stuff VAT free from trade counters and then charging the customer the price + VAT.

So, if the dealer is happy to oblige, they may well like your idea. In fact they may well be delighted to take your cash months before they deliver the car.

What are you getting?

[Scottie]

I think the dealer will only pay VAT to the government, it won't go near MINI. In other words, MINI will supply car to dealers VAT free. The VAT is only collected from the consumer and then passed on. This is just like trades people buying stuff VAT free from trade counters and then charging the customer the price + VAT.

So, if the dealer is happy to oblige, they may well like your idea. In fact they may well be delighted to take your cash months before they deliver the car.

What are you getting?

can't do that Kenl unless they have the same VAT number which I very much doubt as they are not the same company group.




also just for your information if you buy a product that you have to pay vat on or not then you must sell that product with vat applied or not you can't buy vat free and sell vat applied unless you are selling something overseas to a duty free or vat free customer or a fisherman that fishes international waters but then you can get vat paid duty free or duty paid vat free but that's another ball game.

[Andrew]

Scottie,

You are right about the creation of actual tax points (cash or invoice received) but the motor trade can/does operate slightly differently.

It all depends on the arrangement between MINI and the dealerships.

Rather than me trying to explain it I've pasted the relevant part of the VAT Notice for you.

Some of the new cars you offer for sale may not actually belong to you. They’ll have been supplied by a vehicle manufacturer or other supplier on a sale or return (SOR) basis. Although you may have paid some money when they were delivered they're still owned by the supplier. For VAT purposes no tax point has been created - no supply has taken place - and there will be no VAT for you to reclaim. The VAT doesn't become due until you've taken over ownership - or 'appropriated' the car - probably just before you sell it or decide to use it as a demonstrator. You will get an invoice from the supplier showing VAT when you appropriate the car.
If you buy on a SOR basis you might have to pay your supplier a 'stocking charge' until you appropriate the cars. Generally your supplier will set a time limit on how long you can stock the car before you have to appropriate it. The stocking charge is standard-rated for VAT purposes and you can reclaim the VAT on it in the normal way.

[Scottie]

just as I thought Mini still own the car until sold.

However I would have thought if I pay in full for a car now THE current vat rate should be applied regardless. Or would a dealer turn round and say sorry we can't do that if your taking delivery after january then we can't take payment until January.?

[Forbes]

I bagsie your alloys :thumbs up:


I may well be interested to:rolleyes:

[Scottie]

I may well be interested to:rolleyes:

Doubt it I've the same alloys as you have.:smilewinkgrin:

[ianking]

My mate thats a dealer tells me he is much the same as all the others dealers. He gets a car on consignment for 90 days and if he doesnt sell it before then he can hand it back (but pays a fee so never does this), or another dealer can take it or he would have to pay for the car. So the manufacturer owns the car until sold if its in the first 90 days.

[Forbes]

RXs? Have you sold the TDs now?

[Andrew]

just as I thought Mini still own the car until sold.

However I would have thought if I pay in full for a car now THE current vat rate should be applied regardless. Or would a dealer turn round and say sorry we can't do that if your taking delivery after january then we can't take payment until January.?


I would be surprised that a dealer would reject a guaranteed sale but you never know.

I'm no expert in this and there may be additional rules put in place by Revenue & Customs or between MINI and the dealer so please don't quote me, but logically the dealer may lose out of this scenario.

You pay £18K including VAT at 15% of £2347.83 on 01 12 2009 for a car. Tax point created, output tax at 15% (or 3/23rds to be strictly accurate) due to be declared by the dealer on that day.

Dealer doesn't have the car and orders it from MINI. Placing an order shouldn't create a tax point. Car arrives on 19th January 2010 and the dealer pays MINI £15000 including VAT at 17.5% of £2234.02 on that day. The dealer will then claim input tax at 17.5% (or 7/47ths) on the purchase of the car.

The net result for the dealer would be;

Output Tax declared on sale of car £2347.83
Input Tax claimed on purchase of car £2234.02
£ 113.81 Net Loss To Dealer

I've no idea what the dealers pay for the cars so I've just made these figuires up. If the dealer pays more to MINI for the car then the 'Loss' to the dealer would be reduced and may even turn into a gain. On an £18000 car the VAT break even point would be if the dealer pays MINI £15764.

The only thing that I can think of off hand that would change this scenario would be that MINI issue a sales invoice to the dealer as soon as an order is placed regardless if the car is built. Phew!

[Scottie]

RXs? Have you sold the TDs now?

Nope.

[cat1spot]

I would be surprised that a dealer would reject a guaranteed sale but you never know.

I'm no expert in this and there may be additional rules put in place by Revenue & Customs or between MINI and the dealer so please don't quote me, but logically the dealer may lose out of this scenario.

You pay £18K including VAT at 15% of £2347.83 on 01 12 2009 for a car. Tax point created, output tax at 15% (or 3/23rds to be strictly accurate) due to be declared by the dealer on that day.

Dealer doesn't have the car and orders it from MINI. Placing an order shouldn't create a tax point. Car arrives on 19th January 2010 and the dealer pays MINI £15000 including VAT at 17.5% of £2234.02 on that day. The dealer will then claim input tax at 17.5% (or 7/47ths) on the purchase of the car.

The net result for the dealer would be;

Output Tax declared on sale of car £2347.83
Input Tax claimed on purchase of car £2234.02
£ 113.81 Net Loss To Dealer

I've no idea what the dealers pay for the cars so I've just made these figuires up. If the dealer pays more to MINI for the car then the 'Loss' to the dealer would be reduced and may even turn into a gain. On an £18000 car the VAT break even point would be if the dealer pays MINI £15764.

The only thing that I can think of off hand that would change this scenario would be that MINI issue a sales invoice to the dealer as soon as an order is placed regardless if the car is built. Phew!

Similar to Andrew I’m not an expert in vat for the motor trade but based on Andrew’s example it would be cheaper for the dealer to buy the vehicle in January rather than December if it was at a vat inclusive price, as dealer profit is based on costs excluding vat. The £15k inclusive price would be a ‘true’ cost to the dealer of £13043 in December after vat reclaim, in January this would work out as £12766 after vat reclaim so he would have made £277 due to the change in vat rates. The net loss highlighted in Andrews example is just the usual amount of additional vat that would be handed over to customs based on the dealer’s profit element on the deal it just won’t work as the usual % because the vat rates are different.

Realistically though Mini will be quoting the dealer a price plus vat at the prevailing rate and the dealer will compare this price excluding vat to the price excluding vat that he/she is passing on to the customer to identify the profit in the deal.

This assumes that the dealer would be able to reclaim all of his input vat on basis that the tax value on all of his sales was greater than the tax value of his purchases for his vat return period and that there are no special rules on vat reclaim for the motor trade. If there was a case where the dealer could not recover all of the vat then the position would change.

If standard vat rules and monthly vat return periods apply although the dealer is gaining cash flow he/she may not be keen to do this for a significant number of cars as he could run the risk that the sales tax is paid over to customs in one vat return and the reclaim for tax on purchases is in another and he may not have enough sales tax in that period to offset the purchase tax. If it all happens in the one return period then its not an issue.

And finally - yes I’m a boring accountant :computer:but at least I have a Mini.:D

Hpe this all makes sense,
Vicki

[rpn]

However I would have thought if I pay in full for a car now THE current vat rate should be applied regardless. Or would a dealer turn round and say sorry we can't do that if your taking delivery after january then we can't take payment until January.?

I don't think the dealer can allow to ask for the different in VAT after you paid in full up front and they accept your full payment.


if you buy a product that you have to pay vat on or not then you must sell that product with vat applied or not you can't buy vat free and sell vat applied

Not quite, in the catering industry you buy veg and meat VAT free. When you sell on the meal (hot) you have to charge the product VAT.

[Scottie]

I don't think the dealer can allow to ask for the different in VAT after you paid in full up front and they accept your full payment.



Not quite, in the catering industry you buy veg and meat VAT free. When you sell on the meal (hot) you have to charge the product VAT.


would that not be VAT on the service rather than the food.

Funny how you have zero vat on milk vat on orange juice and the best one I like is vat on parking tickets.:argh::argh:

[Scottie]

Similar to Andrew I’m not an expert in vat for the motor trade but based on Andrew’s example it would be cheaper for the dealer to buy the vehicle in January rather than December if it was at a vat inclusive price, as dealer profit is based on costs excluding vat. The £15k inclusive price would be a ‘true’ cost to the dealer of £13043 in December after vat reclaim, in January this would work out as £12766 after vat reclaim so he would have made £277 due to the change in vat rates. The net loss highlighted in Andrews example is just the usual amount of additional vat that would be handed over to customs based on the dealer’s profit element on the deal it just won’t work as the usual % because the vat rates are different.

Realistically though Mini will be quoting the dealer a price plus vat at the prevailing rate and the dealer will compare this price excluding vat to the price excluding vat that he/she is passing on to the customer to identify the profit in the deal.

This assumes that the dealer would be able to reclaim all of his input vat on basis that the tax value on all of his sales was greater than the tax value of his purchases for his vat return period and that there are no special rules on vat reclaim for the motor trade. If there was a case where the dealer could not recover all of the vat then the position would change.

If standard vat rules and monthly vat return periods apply although the dealer is gaining cash flow he/she may not be keen to do this for a significant number of cars as he could run the risk that the sales tax is paid over to customs in one vat return and the reclaim for tax on purchases is in another and he may not have enough sales tax in that period to offset the purchase tax. If it all happens in the one return period then its not an issue.

And finally - yes I’m a boring accountant :computer:but at least I have a Mini.:D

Hpe this all makes sense,
Vicki


I knew there had to an accountant among us somewhere:smilewinkgrin::p what about pre paid vat?? on the returns

[rpn]

would that not be VAT on the service rather than the food.


No, standard rate VAT on hot food but zero rate on cold food ie salad, prawn ****tail etc.

[Scottie]

No, standard rate VAT on hot food but zero rate on cold food ie salad, prawn ****tail etc.


Ok so top tip when out for a meal always make sure it's a salad :thumbs up:

[Scottie]

RXs? Have you sold the TDs now?


actually thinking bout it mines are the same as Ryans

[Andrew]

Ok so top tip when out for a meal always make sure it's a salad :thumbs up:


Errrmm......Not quite.

Salad to eat in at a restaurant is catering and is standard rated. Salad to take away is zero rated.

Sorry:sad:

[cat1spot]

I knew there had to an accountant among us somewhere:smilewinkgrin::p what about pre paid vat?? on the returns

Scottie,
It shouldn't be a problem - this can happen although usually its the other way around vat on purchases would be reclaimed before sales tax is paid over (eg this could happen if dealer purchased a vehicle for his own stock)- but I can check some more when I'm back in at work on Monday. I don't do normal accounting as I work for a local authority and both accounting and vat rules are a bit different but we have a general vat publicaion I can check for you.

I'd just want to check there's no weird rules on tax points for the motor trade.

Vicki

[Andrew]

Scottie,

Here is a link to the VAT Notices on the motor trade;
tp://www.hmrc.gov.uk/vat/sectors/motors/index.htm (http://www.hmrc.gov.uk/vat/sectors/motors/index.htm)

and Notice 700 The Guide on tax points (Section 14 & 15);

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&propertyType=document&columns=1&id=HMCE_CL_001596#P1032_86132

I spoke to a man in the pub last night who really does know about this sort of thing and he says that there are no special rules for the motor trade other than what is in the public notices as we have discussed above. Your scenario would be treated under the normal VAT supply rules; Purchase before 2010 at 15%, Purchase after 17.5%.

Sorry if the links don't work but 've never posted on on the forum before.

[Scottie]

thanks for your help guys:thumbs up: I knew I should have paid attention when sent on those VAT courses.:blush: