How to avoid paying 20% VAT

You can avoid paying the 20% on cars delivered in 2011, but you might have to come up with a big enough deposit to cover the VAT which the dealer will have to invoice for and pay straight away to get them on your side.

It won't cost them a single penny extra to do this, so there's no reason they shouldn't want to help you out. The only person who would be slightly out of pocket would be the bloke on the VAT desk at Her Majesty's Revenue and Customs. Don't all weep at once.

The car you order must cost less than 100,000 and be delivered according to the manufacturer's usual schedules, within six months of order. That means you can't ask for a delivery to be delayed for any reason, to take advantage of the new registration plate in March, for instance.

You cannot use the following techniques if you are buying on finance.

You pay 17.5% VAT on cars costing less than 100,000 if:
• You order a new car, a dealer raises a full VAT invoice before the increase in the rate and pays the tax due at their next VAT return. You do not have to pay the full balance in this case.
• You pay for a car in full before the end of the year but, in the normal course of delivery schedules, it is registered in 2011, but no more than six months from order.
• You have ordered, paid for and registered a car before the end of 2010.

You pay the increased rate of 20% VAT:
• If you order a car after January 4, 2011.
• If you order a car now, but a VAT invoice isn't raised by the dealer before January 4 and the tax due isn't paid by the dealer at their next return.
• If you order a car now, a VAT invoice is raised and paid, but you ask for delivery to be purposefully delayed, perhaps in a bid to get the new registration plates in March or September.
• If the car you order is delivered more than six months from order
• If the car you order is worth more than 100,000.