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#1 on West side

Beat The Vat Increase?

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Like many others, I have chosen to take the company car option as it made sense from a tax point of view at the time. This results in my pre-tax income being reduced by roughly £550. Got a letter last week informing me that due to the VAT increase my monthly lease payments have gone up. They even had the cheek to inform me that it is not a "straight line increase" (good old compound interest and all that, I assume...) and my monthly lease payments are now a whopping £590 (more or less). Nearly 9% increase!!

The fact that the car has been "bought" well before the VAT increase is immaterial... Renegotiating the lease terms is also not feasible...

How many more do you imagine are out there with this belated x-mas present? :angry:

EDIT: typos.

Edited by #1 on West side

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Like many others, I have chosen to take the company car option as it made sense from a tax point of view at the time. This results in my pre-tax income being reduced by roughly £550. Got a letter last week informing me that due to the VAT increase my monthly lease payments have gone up. They even had the cheek to inform me that it is not a "straight line increase" (good old compound interest and all that, I assume...) and my monthly lease payments are now a whopping £590 (more or less). Nearly 9% increase!!

The fact that the car has been "bought" well before the VAT increase is immaterial... Renegotiating the lease terms is also not feasible...

How many more do you imagine are out there with this belated x-mas present? :angry:

EDIT: typos.

Sorry how are they justifying that? I don't understand. The only thing I can imagine is that it is an excuse for taking you for a ride ( in your own car ).

I believe the HPI company buys your company car for you and then sells it at a later date ( normally 3 years later ). The payments you make are to cover depreciation, wear and tear with a certain amount of profit thrown in. Are they saying that the car will depreciate more because of VAT increasing? I thought second hand goods were exempt from VAT, which would mean that more people will buy second hand cars ( a better market and probably less depreciation ).

Have I got this wrong?

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Sorry how are they justifying that? I don't understand. The only thing I can imagine is that it is an excuse for taking you for a ride ( in your own car ).

I believe the HPI company buys your company car for you and then sells it at a later date ( normally 3 years later ). The payments you make are to cover depreciation, wear and tear with a certain amount of profit thrown in. Are they saying that the car will depreciate more because of VAT increasing? I thought second hand goods were exempt from VAT, which would mean that more people will buy second hand cars ( a better market and probably less depreciation ).

Have I got this wrong?

I'll get flamed for this, but IMHO company cars are wrong. If you need a car for work you should be given one to do your job period. Providing someone with a company car as a a benifit simply pushes up not only car prices, but also, servicing, spares, fules, insurance etc for the rest of the population.

But as always in this country we now only look after ourselves and sc*ew the other fellas. Hence the over priced property situation.

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I'll get flamed for this, but IMHO company cars are wrong. If you need a car for work you should be given one to do your job period. Providing someone with a company car as a a benifit simply pushes up not only car prices, but also, servicing, spares, fules, insurance etc for the rest of the population.

But as always in this country we now only look after ourselves and sc*ew the other fellas. Hence the over priced property situation.

I agree with you

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I'll get flamed for this, but IMHO company cars are wrong. If you need a car for work you should be given one to do your job period. Providing someone with a company car as a a benifit simply pushes up not only car prices, but also, servicing, spares, fules, insurance etc for the rest of the population.

But as always in this country we now only look after ourselves and sc*ew the other fellas. Hence the over priced property situation.

In principle I agree with you, which is why I stated that it was a tax decision a the time, Also other complicated parameters, which are less relevant to the point. My point of the post is:

SHTG is right, I am being taken for a ride. They even told me in the letter that the taxable value of the car has not changed (Duhh...) and by my reasoning, the depreciation should also remain unchanged. Simply by increasing the VAT on the "financial services" my payments have increased significantly.

Also, this is yet another hidden inflation element...

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I'll get flamed for this, but IMHO company cars are wrong. If you need a car for work you should be given one to do your job period. Providing someone with a company car as a a benifit simply pushes up not only car prices, but also, servicing, spares, fules, insurance etc for the rest of the population.

But as always in this country we now only look after ourselves and sc*ew the other fellas. Hence the over priced property situation.

in what way? If the car has been bought then surely providing it for personal use does the exact opposite of what you've said as I won't need to buy a personal one and can use the company's. Surely if the car was for work use only, then if I needed one personally, I would then have to buy another.

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Renegotiating the lease terms is also not feasible...

I've never leased a car, or bought anything on finance (apart from credit cards, and my house. My mortgage does not go up when VAT rises. That would be retarded). But I would be pretty sure that VAT is only payable on goods and services, and that (probably) no part of your lease agreement constitues an ongoing service*. The goods - the car - have already been paid for so VAT is not applied retrospectively. All you're doing is paying interest on the loan (no VAT applies) and a certain amount to cover wear and tear and depreciation (no VAT applies since the car has already been bought). And profit for the finance company. They're basically taking the mick. Check your small print. If it says the lease terms cannot be renegotiated that surely applies to both parties.

*how does it work if you pay monthly for things like insurance? I buy insurance in one go so I pay the quote price which includes VAT. If I opt to pay monthly, am I then susceptible to VAT rises, or is the finance agreement worked out on the original quote and subsequent changes to VAT are irrelevant?

Edited by spord

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Like many others, I have chosen to take the company car option as it made sense from a tax point of view at the time. This results in my pre-tax income being reduced by roughly £550. Got a letter last week informing me that due to the VAT increase my monthly lease payments have gone up. They even had the cheek to inform me that it is not a "straight line increase" (good old compound interest and all that, I assume...) and my monthly lease payments are now a whopping £590 (more or less). Nearly 9% increase!!

The fact that the car has been "bought" well before the VAT increase is immaterial... Renegotiating the lease terms is also not feasible...

How many more do you imagine are out there with this belated x-mas present? :angry:

EDIT: typos.

Check your contract... in particular for clauses that might allow them to vary the monthly lease charge (which is usually only done in cases of personal lease purchase, where a payment is based on a variable interest rate is used related to an interbank or finance house rate... these aren't the norm in company cars).

You entered into a contract for this car, at a quoted rate. Unless they have written the ability to change this into the contract then simply write back and refuse to accept the changes, pointing out that they are in breach of contract if they try to enforce the change upon you.

Even if they have written a clause allowing them to vary the payment check to see if they have provided an option for early termination in such a case. If they have not, then there may be grounds for this being declared an unfair contract.

UK contract law does not allow for someone to construct a lease contract that allows them to subsequently vary payments without your agreement. Imagine if they suddenly decided to up it by 30, 70 or 200 percent because they felt like it. You should have protection from this in the contract, if it is fair and legal.

IMHO it sounds like they are trying it on. They know that they will be hit for VAT on servicing and maintenance costs so they are using it as an excuse to bump up the payment, somewhat disproportionately too! Check your contract. Push back. Don't accept it. Threaten legal action or invoke a termination clause/process (both of which cost them a fortune so they are keen to avoid).

Good luck!

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I'll get flamed for this, but IMHO company cars are wrong. If you need a car for work you should be given one to do your job period. Providing someone with a company car as a a benifit simply pushes up not only car prices, but also, servicing, spares, fules, insurance etc for the rest of the population.

But as always in this country we now only look after ourselves and sc*ew the other fellas. Hence the over priced property situation.

I think most of what you're saying is out of date. As a benefit they are fairly pointless now, because the tax implications are pretty huge. 10 or more years ago, it was a fine line, being worthwhile if you did a certain amount of business miles ( 5000ish or something I forget ). Anything less than that and you were better off taking a cash car allowance ( provided your company gave you the option ). I was in that position and opted for the cash because I didn't do enough driving ( in reality, I had a 98% office job, but others in my role were out of the office 50% of the time ). Before that scheme ( in the late 80s early 90s, which was before my time ), I believe they were a tax dodge benefit and were 'wrong'.

These days they are only worth taking for people who are effectively given one to do their job. If you do 30000 business miles a year. The cost of owning your own car will be huge and it is an unfair cost to pass on the the employee.

The company I work for now makes us use hire cars for business travel.

Edited by SomethingHasToGive

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I've never leased a car, or bought anything on finance (apart from credit cards, and my house. My mortgage does not go up when VAT rises. That would be retarded). But I would be pretty sure that VAT is only payable on goods and services, and that (probably) no part of your lease agreement constitues an ongoing service*. The goods - the car - have already been paid for so VAT is not applied retrospectively. All you're doing is paying interest on the loan (no VAT applies) and a certain amount to cover wear and tear and depreciation (no VAT applies since the car has already been bought). And profit for the finance company. They're basically taking the mick. Check your small print. If it says the lease terms cannot be renegotiated that surely applies to both parties.

No business leasing doesn't work like. You are not paying off a loan, you are "hiring" a car long term. VAT is due on the whole monthly payment.

Though I can't understand why it doesn't just go up by the 2.5%

tim

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I think most of what you're saying is out of date. As a benefit they are fairly pointless now, because the tax implications are pretty huge. 10 or more years ago, it was a fine line, being worthwhile if you did a certain amount of business miles ( 5000ish or something I forget ). Anything less than that and you were better off taking a cash car allowance ( provided your company gave you the option ). I was in that position and opted for the cash because I didn't do enough driving ( in reality, I had a 98% office job, but others in my role were out of the office 50% of the time ). Before that scheme ( in the late 80s early 90s, which was before my time ), I believe they were a tax dodge benefit and were 'wrong'.

These days they are only worth taking for people who are effectively given one to do their job. If you do 30000 business miles a year. The cost of owning your own car will be huge and it is an unfair cost to pass on the the employee.

The company I work for now makes us use hire cars for business travel.

Nah company cars are great. I don't get a personal petrol allowance and the tax implications for the car are about £50 a month, less I think actually. For that I get a brand new car, tyres, servicing, tax, breakdown cover etc. If you can get that for <£600pa then tell me where. The depreciation costs more than that without anything else. Plus the company usually covers minor accidents. I lost my door mirror in a bus-proximity incident, they are surprisingly expensive!

edit - I checked, it's £437pa

Edited by bazzer

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*how does it work if you pay monthly for things like insurance? I buy insurance in one go so I pay the quote price which includes VAT. If I opt to pay monthly, am I then susceptible to VAT rises, or is the finance agreement worked out on the original quote and subsequent changes to VAT are irrelevant?

Insurance is not subject to VAT. It is however subject to IPT (insurance premium tax) that increased from 5 to 6% on 4th January. Insurance however is an annual contract so the additional IPT will only kick in for new policies or renewals due after 4th Jan.

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I think most of what you're saying is out of date. As a benefit they are fairly pointless now, because the tax implications are pretty huge. 10 or more years ago, it was a fine line, being worthwhile if you did a certain amount of business miles ( 5000ish or something I forget ). Anything less than that and you were better off taking a cash car allowance ( provided your company gave you the option ). I was in that position and opted for the cash because I didn't do enough driving ( in reality, I had a 98% office job, but others in my role were out of the office 50% of the time ). Before that scheme ( in the late 80s early 90s, which was before my time ), I believe they were a tax dodge benefit and were 'wrong'.

These days they are only worth taking for people who are effectively given one to do their job. If you do 30000 business miles a year. The cost of owning your own car will be huge and it is an unfair cost to pass on the the employee.

The company I work for now makes us use hire cars for business travel.

If you were given cash in hand, you would have to fork up to 41% to the taxman with 40% max income tax and 1% NI. You employer also has to fork out 12.8% NI. Then there is the VAT you pay on the car.

Company car tax is still no way near this level. I still know people earning less than 20K driving around in 3 series as a perk rather than a need.

Hiring cars, or having pool cars for use on need basis is the correct way. There is no overlap between personal costs and company work related costs.

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If you were given cash in hand, you would have to fork up to 41% to the taxman with 40% max income tax and 1% NI. You employer also has to fork out 12.8% NI. Then there is the VAT you pay on the car.

Company car tax is still no way near this level. I still know people earning less than 20K driving around in 3 series as a perk rather than a need.

Hiring cars, or having pool cars for use on need basis is the correct way. There is no overlap between personal costs and company work related costs.

The cash in hand was less than the money to the taxman, so the 12.8% was probably covered in there.

I think the point was I didn't value the 'new' company car over my current car. So I had my current car ( which was second hand and bought about 3 years old, but I had already paid for ) versus the cost of the new one. Maybe it wasn't as clear cut as I thought.

So maybe it is a perk, just not for someone who doesn't think new cars are worth the price and doesn't buy a car every 3 years.

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  • 285 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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