TAX increase on new cars effect from Jan 2011 - Ferrari Life
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post #1 of 43 Old 12-15-2010, 06:35 AM Thread Starter
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TAX increase on new cars effect from Jan 2011

Check this out - I've been waiting since June to get my F458, cutting a long story short should have got it in Dec, so its now Dec and still waiting.

I've been told if its goes into Jan I have to pay a further £5000 tax since VAT is going up from 17.5% -> 20% - WHAT A JOKE

Solicitor is on the case .......
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post #2 of 43 Old 12-15-2010, 06:38 AM
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That's highly annoying. If Ferrari promised a delivery date before Jan, should they not pick up the tab? I can see the argument from the government, nothing to do with them really.


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post #3 of 43 Old 12-15-2010, 07:12 AM Thread Starter
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My lawyer told me they haven't got a leg to stand on, I have my order
form and it "clearly" states June delivery.

They are wasting their time with me, the only problem is I can't even say
I'll take my order elsewhere since they hold a £20,000 deposit. !!!!

It a bit of a dilemma for the dealer, if it does go into Jan then they are
stuck with a £5,000 TAX BILL which they could get off Ferrari. ?
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post #4 of 43 Old 12-15-2010, 07:52 AM
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Was the delivery delay related in any way to the earlier 'fire' issues?

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post #5 of 43 Old 12-15-2010, 07:56 AM Thread Starter
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That I do not know - I think my dealer took two many orders and
Ferrari can't meet the demand - was also told they are seriously
limiting the number of F458's per year.

Soon as my lawyer gets a reply I'll post it here.
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post #6 of 43 Old 12-15-2010, 08:54 AM
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Ghufran,

I am a US tax attorney and based on our operations in Europe, the proposed and actual increases in VAT for 2011 in countries that we do business, the increase does not apply to purchases made prior to 1/1/11. Thus, if you purchased your 458 in 2010, I seriously doubt the 2011 rates would apply, even if you take delivery in 2011. My understanding of the new VAT rates is that purchases made in 2010, but delivery taken in 2011 are only subject to 2010 VAT rates. You should verify this application of the statute with your attorney. The question is whether you purchased the 458 in 2010 or 2011 based on the VAT statute. I seriously doubt the new rate would apply because it would be unfair to impose a 2011 tax rate on 2010 purchases as it creates inadequate notice of an increase in costs for both the vendor and the purchaser.
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post #7 of 43 Old 12-16-2010, 03:04 AM Thread Starter
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Originally Posted by redtrman View Post
Ghufran,

I am a US tax attorney and based on our operations in Europe, the proposed and actual increases in VAT for 2011 in countries that we do business, the increase does not apply to purchases made prior to 1/1/11. Thus, if you purchased your 458 in 2010, I seriously doubt the 2011 rates would apply, even if you take delivery in 2011. My understanding of the new VAT rates is that purchases made in 2010, but delivery taken in 2011 are only subject to 2010 VAT rates. You should verify this application of the statute with your attorney. The question is whether you purchased the 458 in 2010 or 2011 based on the VAT statute. I seriously doubt the new rate would apply because it would be unfair to impose a 2011 tax rate on 2010 purchases as it creates inadequate notice of an increase in costs for both the vendor and the purchaser.

Don't tell me thats your F40 ?

There is a big article about the F40 in this weeks autocar magazine over here in the UK. Its a legend !!!!!

Anyway regarding this TAX I was told if a delivery is in 2011 then that shows up on their books hence they need to pay 20%. But like I said
I have a piece of paper stating delivery in June 2010 and it does "not" say
estimated.

I am getting a little impatient with this, its going to snow here very soon and my house is down a very steep slope so I won't be getting it this year now.

If this prolongs then I will purchase a LP560 until the F458 comes.
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post #8 of 43 Old 12-16-2010, 07:16 AM
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Originally Posted by Ghufran View Post
Don't tell me thats your F40 ?
OK, I won't tell you.

The car in the photo is one of the rare Michelotto F40's, do the math, I still believe in Santa Claus every Christmas and pray.

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Originally Posted by Ghufran View Post


Anyway regarding this TAX I was told if a delivery is in 2011 then that shows up on their books hence they need to pay 20%. But like I said
I have a piece of paper stating delivery in June 2010 and it does "not" say
estimated.

I am getting a little impatient with this, its going to snow here very soon and my house is down a very steep slope so I won't be getting it this year now.

If this prolongs then I will purchase a LP560 until the F458 comes.
I will assume the dealership is telling you that the new rate applies? I understand the situation and in our business, we deal with this on a daily basis by 3rd party vendors who think they will be stuck with the tax liability.

Based on the rates you provided, I assume the dealership is UK based. I also assume that you made a deposit, but have not paid the full purchase price, which will be paid upon delivery? If these are your facts, I have to agree with the dealership based on the UK Inland Revenue guidance for VAT as follows:

Deposits - VAT applies to the amount paid.

Delivery or prepayment of goods or services - If you do not prepay the balance, VAT applies when the goods or services are delivered. Thus, if you take delivery in 2011 without prepayment, you will be obligated to pay the VAT rate on the balance due upon actual delivery in 2011.

However, if you prepay the balance prior to 1/1/11 and have not taken delivery of the vehicle, you will be obligated to pay the VAT at the 2010 rate.

Delivery or payment of balance due in 2011 - the 2011 VAT rates will apply to the balance paid or due upon delivery.

From Inland Revenue website:
[h3]Advance payments and deposits[/h3]


An advance payment, or deposit, is a proportion of the total selling price that a customer pays before you supply them with goods or services. If you ask for an advance payment, the tax point is whichever of the following happens first:
  • the date you issue a VAT invoice for the advance payment
  • the date you receive the advance payment
You include the VAT on the advance payment on the VAT Return for the period when the tax point occurs.


If the customer pays you the remaining balance before the goods are delivered or the services are performed, another tax point is created when whichever of the following happens first:
  • you issue a VAT invoice for the balance
  • you receive payment of the balance
So you include the VAT on the balance on the return for the period when the tax point occurs.
[h3]Example[/h3]
A customer wants to buy a bicycle from you. The total price is £200 including VAT and they pay you a deposit of £50 (including £7.44 VAT) on 1 July. You account for the £7.44 VAT on the return that covers 1 July.
Before delivery your customer then pays you the balance of £150 (including VAT of £22.34) on 1 December and you account for the VAT of £22.34 on the return that covers 1 December.


You may want to research their website for futher information:

http://www.hmrc.gov.uk/vat/managing/...nstalments.htm



Now that I have provided you information overload, it appears that you may be able to get the 2010 VAT rates applied to the balance due under the following scenario:


14.2.2 Actual tax points
If you…

(a) either issue a VAT invoice or receive a payment before the basic tax point

Then the…

tax point for the amount you invoice or receive is the date you issue the invoice or receive the payment, whichever happens first.



14.3 Applying these tax point rules on 4 January 2011

Where a tax point occurs before 4 January 2011 the supply (or the part of it covered by the tax point) will remain liable to VAT at 17.5 per cent. Tax points occurring on or after 4 January 2011 will be liable to VAT at 20 per cent.

In many cases a supply will have a single tax point – for example, if you are a retailer, and a customer enters your shop and pays cash for an item which they take away with them. The tax point occurs when the goods are handed over/paid for. So where this happens before 4 January 2011 the supply is liable to VAT at 17.5 per cent. On or after 4 January 2011 the supply will be liable at 20 per cent.

In other situations there can be two or more tax points. For example, you may receive a deposit for goods to be delivered later. This makes the position less straightforward. Here, a deposit received before 4 January 2011 will be liable to VAT at 17.5 per cent (but see below). However, if the goods are not delivered (and the balance of the price is not invoiced or paid for) until on or after 4 January 2011, the 20 per cent rate will apply when it comes to accounting for the remaining VAT that is due.


At the end of the day, if you are not taking delivery in 2010 and not paying the balance due prior to delivery in 2010, then your only option is to request the Dealership to issue you a VAT invoice for the balance due prior to January 4, 2011. This creates a tax point that is subject to the 17.5% rate.

Here is the link to their webpage that provides the guidance above:

http://search.hmrc.gov.uk/kb5/hmrc/h...+standard+rate

click on the third item or maybe this link will work:

VATCHANGE OF THE STANDARD RATE TO 20 PER CENT: A DETAILED GUIDE FOR VAT-REGISTERED ..

Good luck Mate!

Last edited by redtrman; 12-16-2010 at 08:05 AM.
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post #9 of 43 Old 12-16-2010, 07:24 AM Thread Starter
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Fantastic response :-)
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post #10 of 43 Old 12-16-2010, 07:59 AM
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Originally Posted by Ghufran View Post
Fantastic response :-)
Your very welcome. As a follow up, my VAT expert confirmed that even if the dealership issues you a VAT invoice for the balance due prior to January 4, 2011 and you pay the VAT, but do not take delivery of the vehicle, you are entitled to a refund of the VAT paid.

Do not even ask about my billing rate.
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post #11 of 43 Old 12-16-2010, 08:38 AM
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Quote:
Originally Posted by Ghufran View Post
Fantastic response :-)

Ghufran, I have been following that thread and initially was 100% on
redtrman's argumentation. Make sure you pay the whole bill this year, as the bill will contain this years VAT rate, no matter when the actual delivery will happen. So far, this was the case always in Switzerland as well. As of the end of this year, our VAT rate will raise from 7.6% to 8% so we have a equal situation as in the UK. Because your issue sounded interesting I called my tax lawyer. He told me that for the first time since the VAT has been introduced in Switzerland (1995) VAT rates will depend on the date of the actual product delivery to the buyer instead of (so far) time of sales according to the bill.
Probably the "bended" the actual application of the VAT tax law in a similar manner in the UK for that big VAT increase of roughly 20%(!). I would not wonder. Interesting to follow up your findouts.
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post #12 of 43 Old 12-16-2010, 10:36 AM
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you haven't gotten his bill yet........


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Originally Posted by Ghufran View Post
Fantastic response :-)


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post #13 of 43 Old 12-17-2010, 11:42 PM
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Looks like the best way is to settle the account now to save the 5k. Certainly take delivery in Jan as a 2011 car will be worth 5k more than a late 2010 in any case so the situation has saved you 10k overall.
Perfect!
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post #14 of 43 Old 12-18-2010, 07:41 AM
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I was with my tax advisor at Grant Thornton last Tuesday and the UK VAT situation is as follows - any goods or service that will be provided within 6 months of the increase of the rate on the 4th January 2011 can be paid for before this date provided they do not exceed a total value of £100,000. The 458 is significantly above this figure so will not qualify for exemption. Your dealer is therefore correct I'm afraid.

Just to pile on the bad news I am certain that if you read the small print of your order the dealer and Ferrari will not guarantee a delivery date so you will be unlikely to win any legal arguement with them. The clause usually reads something like "The Seller will his his best endeavours to secure delivery date or dates but shall be under no liability whatsoever for loss occassioned by delay in delivery arising out of any cause beyond the contro of the Seller." That is taken from the Graypaul/Maranello order form.

Initial deliveries of UK cars happened later than first anticipated. The first ones arrived in June and even then there were only one or two cars per dealer (and this was only for the larger dealers - Graypaul, Maranello, H R Owen). The smaller dealers didn't get their first customer cars until July. I got the first customer car at my dealer and he has only had two more since then and they both arrived within the last 6 weeks I think. To have recieved a June car you'd have had to be first or second customer on your dealer's list.
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post #15 of 43 Old 12-19-2010, 02:30 AM
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Originally Posted by iainuk View Post
I was with my tax advisor at Grant Thornton last Tuesday and the UK VAT situation is as follows - any goods or service that will be provided within 6 months of the increase of the rate on the 4th January 2011 can be paid for before this date provided they do not exceed a total value of £100,000. The 458 is significantly above this figure so will not qualify for exemption. Your dealer is therefore correct I'm afraid.

Just to pile on the bad news I am certain that if you read the small print of your order the dealer and Ferrari will not guarantee a delivery date so you will be unlikely to win any legal arguement with them. The clause usually reads something like "The Seller will his his best endeavours to secure delivery date or dates but shall be under no liability whatsoever for loss occassioned by delay in delivery arising out of any cause beyond the contro of the Seller." That is taken from the Graypaul/Maranello order form.

Initial deliveries of UK cars happened later than first anticipated. The first ones arrived in June and even then there were only one or two cars per dealer (and this was only for the larger dealers - Graypaul, Maranello, H R Owen). The smaller dealers didn't get their first customer cars until July. I got the first customer car at my dealer and he has only had two more since then and they both arrived within the last 6 weeks I think. To have recieved a June car you'd have had to be first or second customer on your dealer's list.
Your written arguments make very much sense to me.
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post #16 of 43 Old 12-19-2010, 03:12 AM
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Apologies for the typos in my previous post. I typed it in a hurry and forgot to check it. The delivery liability clause should have read...

""The Seller will his use his best endeavours to secure delivery date or dates but shall be under no liability whatsoever for loss occassioned by delay in delivery arising out of any cause beyond the control of the Seller."
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post #17 of 43 Old 12-22-2010, 05:32 AM Thread Starter
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Quote:
Originally Posted by iainuk View Post
I was with my tax advisor at Grant Thornton last Tuesday and the UK VAT situation is as follows - any goods or service that will be provided within 6 months of the increase of the rate on the 4th January 2011 can be paid for before this date provided they do not exceed a total value of £100,000. The 458 is significantly above this figure so will not qualify for exemption. Your dealer is therefore correct I'm afraid.

Just to pile on the bad news I am certain that if you read the small print of your order the dealer and Ferrari will not guarantee a delivery date so you will be unlikely to win any legal arguement with them. The clause usually reads something like "The Seller will his his best endeavours to secure delivery date or dates but shall be under no liability whatsoever for loss occassioned by delay in delivery arising out of any cause beyond the contro of the Seller." That is taken from the Graypaul/Maranello order form.

Initial deliveries of UK cars happened later than first anticipated. The first ones arrived in June and even then there were only one or two cars per dealer (and this was only for the larger dealers - Graypaul, Maranello, H R Owen). The smaller dealers didn't get their first customer cars until July. I got the first customer car at my dealer and he has only had two more since then and they both arrived within the last 6 weeks I think. To have recieved a June car you'd have had to be first or second customer on your dealer's list.
Unfortunatly you are correct, my solicitor only confirmed what was inevitable this morning, its a 5k hit, I'm trying to see if I can pay the entire amount in the next 24 hours but its really risky doing so as I have no car and god forbid the dealer goes bust I've lost it all !!!!!

I'm going to think about what to do tonight and make a call tomorrow. Personally to ensure I don't loose £190k I might just take the hit of 5k, my spec car is going well above the list price so its a little comfort that I know for a year at least I won't loose any money.

I suppose watching the F458 on lastnights TopGear was a little comfort !!
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post #18 of 43 Old 12-23-2010, 12:59 PM
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Quote:
Originally Posted by Ghufran View Post
Unfortunatly you are correct, my solicitor only confirmed what was inevitable this morning, its a 5k hit, I'm trying to see if I can pay the entire amount in the next 24 hours but its really risky doing so as I have no car and god forbid the dealer goes bust I've lost it all !!!!!

I'm going to think about what to do tonight and make a call tomorrow. Personally to ensure I don't loose £190k I might just take the hit of 5k, my spec car is going well above the list price so its a little comfort that I know for a year at least I won't loose any money.

I suppose watching the F458 on lastnights TopGear was a little comfort !!
What happened on Top Gear?
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post #19 of 43 Old 12-23-2010, 02:33 PM
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What happened on Top Gear?
http://www.streetfire.net/video/top-...21_2100203.htm
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post #20 of 43 Old 12-24-2010, 12:24 AM
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Quote:
Originally Posted by Ghufran View Post
Unfortunatly you are correct, my solicitor only confirmed what was inevitable this morning, its a 5k hit, I'm trying to see if I can pay the entire amount in the next 24 hours but its really risky doing so as I have no car and god forbid the dealer goes bust I've lost it all !!!!!

I'm going to think about what to do tonight and make a call tomorrow. Personally to ensure I don't loose £190k I might just take the hit of 5k, my spec car is going well above the list price so its a little comfort that I know for a year at least I won't loose any money.

I suppose watching the F458 on lastnights TopGear was a little comfort !!
If you do have to pay the extra GBP 5k, I would expect the dealer to provide a significant goodwill gesture.....perhaps a place gratis on the next Pilota program.
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