Wow brilliant news. An unexpected windfall. I really hope you will spend it on something special. Take yourselves away for a romantic weekend, its a chance to have a nice drive in your new car too!! Enjoy!!

Hi friends, thanks for all of your comments. The good news is that armed with the info my wife asked the car dealership for the VAT reduction and we were phoned back after an hour to be told that we will get it when we collect the new car next week. Thanks again for the info...............Moneyduffer

Hey there again Moneyduffer. I have good news for you!! See website www.hmrc.gov.uk look at prebudget report 2008 VAT changes.Question and answers for consumers Q6 & Q9 you will be happy!!!

All I was pointing out was that if an invoice has been raised then the date on the invoice is the point of sale and that determines the rate of VAT. So if an invoice has been raised the only way to get the new rate would be to issue a credit note and then re invoice after 1 December - which might invite questions if there is a VAT inspection.

If no actual invoice has been raised then there isn't a problem as it will be raised after 1 December and will attract 15%. However, the HMRC guidance does state that if an invoice is raised after 1 December for goods that have been paid for before 1 December then 17.5% applies so this might have to be applied to the deposit.

It is a new car that our friend has ordered. I charge VAT on my company invoices. It is not a question of doing anything illegal!!
Guidance will be provided on the Customs and Excise website. I feel it is common sense that if the car is registered on the 1st of December it should be 15% that is charged. Customs and excise are always extremely helpful, there is no question about non compliance!!

True but if he has already raised an invoice he would have to raise a credit note and then reissue an invoice. In the unlikely event he got a VAT inspection this is likely to be questioned and penalties applied for non compliance with VAT laws - not something I'd risk even for a friend.

The other complication is that second hand car dealers don't pay (or charge you) VAT on the full price of the car - they only pay VAT on the profit earned as most of the cars they buy in don't have VAT attached. So the reduction you'd get for the change to 15% will be alot less than you might think it would be.

There is no harm asking for the reduction, after all the actual sale is in December. It is no skin off the dealers nose, at the end of the day he just passes on the VAT charged to the revenue.

I would expect the VAT to be the rate in effect on the invoice date. If you've already had an invoice, you'll be paying 17½%. If you've not had one, you should ask for one after 1 December (assuming that you are taking delivery in December) and it should show 15%.

I ordered a new car last month with delivery next week, after the start date of the reduction of VAT to 15%. I have paid just £300 deposit the balance being due at delivery. Where do I stand with the retailer with regard to the VAT reduction ? Should I expect the reduction to be automatic or should I prepare for a fight ?