VAT included in the price, or not?
Discussion
So ... my mother bought herself a shiny new Fiat 500 Abarth Maserati Edition last year, and very pretty/fun it is too. All good so far.
She "bought" it from a London Fiat dealership, although the contract was ostensibly entered into with Abarth & C SpA.
In that contract, the "Agreed Price" is defined as "(i) the net price of the vehicle ... (ii) ... (iii) ... (iv) taxes, contributions and fees linked by law to the purchase".
A few months after having made the purchase, my mother gets a demand from HMRC demanding that £5.3k VAT be paid on the purchase. At this point I took over and played a bit of letter tennis with HMRC. My argument going along the lines of "you're chasing the wrong person because VAT is deeemed to be included in a quoted price in the UK and it is therefore Fiat who is in breach and not my mother.
This technique worked for about 9 months but HMRC have just sent a letter saying that they are chasing my mother and any dispute between her and Fiat is a civil matter.
I don't necessarily disagree with anything that HMRC is saying (although I think that it is pretty rum to chase just my mother rather than Fiat as well).
Needless to say, Fiat London are refusing to take/return my calls and the only way I can get through is by pretending to be a prospective purchaser!
Anyway, I think that the way forward is to pay (no point paying interest on the sum as well) and then hit Fiat with a letter before claim. Any advice/suggestions on this part of the law gratefully received as it is not an area about which I know much.
I was also thinking that the threat of and OFT/Rogue Traders complaint (and actually making the complaint if they don't pay up) might be more effective than the purely legal route.
Thanks!
She "bought" it from a London Fiat dealership, although the contract was ostensibly entered into with Abarth & C SpA.
In that contract, the "Agreed Price" is defined as "(i) the net price of the vehicle ... (ii) ... (iii) ... (iv) taxes, contributions and fees linked by law to the purchase".
A few months after having made the purchase, my mother gets a demand from HMRC demanding that £5.3k VAT be paid on the purchase. At this point I took over and played a bit of letter tennis with HMRC. My argument going along the lines of "you're chasing the wrong person because VAT is deeemed to be included in a quoted price in the UK and it is therefore Fiat who is in breach and not my mother.
This technique worked for about 9 months but HMRC have just sent a letter saying that they are chasing my mother and any dispute between her and Fiat is a civil matter.
I don't necessarily disagree with anything that HMRC is saying (although I think that it is pretty rum to chase just my mother rather than Fiat as well).
Needless to say, Fiat London are refusing to take/return my calls and the only way I can get through is by pretending to be a prospective purchaser!
Anyway, I think that the way forward is to pay (no point paying interest on the sum as well) and then hit Fiat with a letter before claim. Any advice/suggestions on this part of the law gratefully received as it is not an area about which I know much.
I was also thinking that the threat of and OFT/Rogue Traders complaint (and actually making the complaint if they don't pay up) might be more effective than the purely legal route.
Thanks!
as a layman:
If you are registered for VAT, you must charge VAT on all VAT taxable supplies of goods and services that you make. 'Supplies' include day-to-day sales as well as anything else that you sell or invoice for
http://www.hmrc.gov.uk/vat/managing/charging/charg...
to me that means VAT has to be charged and is therefore included in the invoice price
If you are registered for VAT, you must charge VAT on all VAT taxable supplies of goods and services that you make. 'Supplies' include day-to-day sales as well as anything else that you sell or invoice for
http://www.hmrc.gov.uk/vat/managing/charging/charg...
to me that means VAT has to be charged and is therefore included in the invoice price
Cliftonite said:
Did neither you nor your mother think it odd that she was buying a car some £5000 cheaper than the market price?
(a) Not unusual; (b) Point iv above mentions taxes relating to the sale.
Don't understand where HMR&C are coming from here - the VAT-registered seller pays the output VAT across to them, not the (non-VAT registered) purchaser. Really don't understand this one...maybe if more of the T&Cs were published someone could offer more help?
I can't see how HMRC are chasing someone who is not registered for VAT for VAT.
Is there no tribunal, court or ombudsman to appeal to? (or at least get a hearing).
In New Zealand you can go to the Disputes Tribunal to argue you don't owe money, is that option available in the UK?
I suspect if you pay you will never see the money again, as you are admitting money is owed.
Very strange.
Is there no tribunal, court or ombudsman to appeal to? (or at least get a hearing).
In New Zealand you can go to the Disputes Tribunal to argue you don't owe money, is that option available in the UK?
I suspect if you pay you will never see the money again, as you are admitting money is owed.
Very strange.
Pretty certain there was another thread like this, the VAT man should go after the dealer and as the dealer (in that case) screwed up they were trying to place blame on the individual who did not buy a business car.
Cant remember how that turned out, might be worth a search on PH for that thread.
Cant remember how that turned out, might be worth a search on PH for that thread.
Cliftonite said:
Did neither you nor your mother think it odd that she was buying a car some £5000 cheaper than the market price?
I don't think that the price paid seemed to be suspiciously low, and it was from a "reputable" dealer. Merely getting a good deal on something does not mean that one should bend over and let them get away with breaching the contract. My concern is that, Fiat UK say that they have nothing to do with it and they are merely a post box for Abarth C SpA and then we're looking at getting/enforcing judgment in Italy.
My mother is actually taking a "pay the man and damn his eyes" approach to this. It's more me who is p*ssed off with Fiat for (a) what could at best be called sharp practice / breach of contract and (b) their terrible customer service in dealing with this.
OutOfSync said:
She "bought" it from a London Fiat dealership, although the contract was ostensibly entered into with Abarth & C SpA.
In that contract, the "Agreed Price" is defined as "(i) the net price of the vehicle ... (ii) ... (iii) ... (iv) taxes, contributions and fees linked by law to the purchase".
It looks like the car was actually bought from Abarth & C rather than Fiat London so Fiat London would not be a party to the contract and could not be pursued by HMRC.In that contract, the "Agreed Price" is defined as "(i) the net price of the vehicle ... (ii) ... (iii) ... (iv) taxes, contributions and fees linked by law to the purchase".
Would this effectively make it a personal import and make the buyer responsible for accounting for the VAT? Abarth have exported the vehicle and would deal with any Italian taxes leaving the buyer to deal with import taxes.
Edit - I agree that Fiat London should have made it abundantly clear who the contract was with and that vat would be payable. As an aside will this affect the warranty too?
James P said:
OutOfSync said:
She "bought" it from a London Fiat dealership, although the contract was ostensibly entered into with Abarth & C SpA.
In that contract, the "Agreed Price" is defined as "(i) the net price of the vehicle ... (ii) ... (iii) ... (iv) taxes, contributions and fees linked by law to the purchase".
It looks like the car was actually bought from Abarth & C rather than Fiat London so Fiat London would not be a party to the contract and could not be pursued by HMRC.In that contract, the "Agreed Price" is defined as "(i) the net price of the vehicle ... (ii) ... (iii) ... (iv) taxes, contributions and fees linked by law to the purchase".
Would this effectively make it a personal import and make the buyer responsible for accounting for the VAT? Abarth have exported the vehicle and would deal with any Italian taxes leaving the buyer to deal with import taxes.
EDIT - James P I agree that Fiat London have not behaved well and that they should have made my mother aware of the tax implications of the purchase structure (although ignorantia juris non excusat etc). That was why I was thinking a non legal OFT-esque approach may yield better results...
Edited by OutOfSync on Wednesday 19th February 09:57
It does seem that it all hinges on whether this was handled as a personal import or something else : https://www.gov.uk/importing-vehicles-into-the-uk/...
Who registered the vehicle ?
Who registered the vehicle ?
Thanks for the responses all.
I think that before going into battle I need to establish:
1. Was my mother the first purchaser of the car in the UK, or was it Fiat? The registration documents and payee should help establish this.
2. Who was the contracting party with my mother?
3. Was Fiat London in breach of their duties to my mother by claiming that the car was price X when in fact it was X plus VAT? Could this give rise to a claim in itself?
4. If Fiat London is not the correct entity to sue, is it worth chasing Abarth C Spa in Italy re clause 3(iv) (Purchase Price) of the contract, or would it be prohibitively expensive?
I think that before going into battle I need to establish:
1. Was my mother the first purchaser of the car in the UK, or was it Fiat? The registration documents and payee should help establish this.
2. Who was the contracting party with my mother?
3. Was Fiat London in breach of their duties to my mother by claiming that the car was price X when in fact it was X plus VAT? Could this give rise to a claim in itself?
4. If Fiat London is not the correct entity to sue, is it worth chasing Abarth C Spa in Italy re clause 3(iv) (Purchase Price) of the contract, or would it be prohibitively expensive?
OutOfSync said:
Anyway, I think that the way forward is to pay (no point paying interest on the sum as well) and then hit Fiat with a letter before claim. Any advice/suggestions on this part of the law gratefully received as it is not an area about which I know much.
This is really sharp practice, I also didn't even consider that a UK dealer will allow you to buy a car from abroad without sorting the actual price for you. Otherwise, what is the point of the dealer?The key of how to go forward is who *exactly* your contract is with - that is the written contract.
There is also the argument that the dealer has acted as an 'agent' of Abarth, which clearly they have.
It has been the law for a few years that unless a retailer is selling to a business that advertised prices must be VAT inclusive. Further to that, it could well be argued that the dealer should have informed you of these costs, either separately or as an agent of Abarth.
Which way you go down comes to the facts.
What would be useful is more information about the exact contractual structure here, as of course you need to sue the right people.
JustinP1 said:
This is really sharp practice, I also didn't even consider that a UK dealer will allow you to buy a car from abroad without sorting the actual price for you. Otherwise, what is the point of the dealer?
The key of how to go forward is who *exactly* your contract is with - that is the written contract.
There is also the argument that the dealer has acted as an 'agent' of Abarth, which clearly they have.
It has been the law for a few years that unless a retailer is selling to a business that advertised prices must be VAT inclusive. Further to that, it could well be argued that the dealer should have informed you of these costs, either separately or as an agent of Abarth.
Which way you go down comes to the facts.
What would be useful is more information about the exact contractual structure here, as of course you need to sue the right people.
Agreed. Having reviewed the documents which my mother has given me, it seems likely that the contracting party was Abarth C SpA with Fiat London acting as either their agent or a branch office. The key of how to go forward is who *exactly* your contract is with - that is the written contract.
There is also the argument that the dealer has acted as an 'agent' of Abarth, which clearly they have.
It has been the law for a few years that unless a retailer is selling to a business that advertised prices must be VAT inclusive. Further to that, it could well be argued that the dealer should have informed you of these costs, either separately or as an agent of Abarth.
Which way you go down comes to the facts.
What would be useful is more information about the exact contractual structure here, as of course you need to sue the right people.
Slightly annoying as we'd much rather commence proceedings against a UK entity but still, I think that there is a strong case here against Abarth C SpA.
.
OutOfSync said:
My mother is actually taking a "pay the man and damn his eyes" approach to this. It's more me who is p*ssed off with Fiat for (a) what could at best be called sharp practice / breach of contract and (b) their terrible customer service in dealing with this.
This seems to happen a lot here - PHers being upset on behalf of other people, when the other person isn't bothered (for whatever reason) about it.If this goes legal will your mother thank you for pursuing it?
NPI said:
OutOfSync said:
My mother is actually taking a "pay the man and damn his eyes" approach to this. It's more me who is p*ssed off with Fiat for (a) what could at best be called sharp practice / breach of contract and (b) their terrible customer service in dealing with this.
This seems to happen a lot here - PHers being upset on behalf of other people, when the other person isn't bothered (for whatever reason) about it.If this goes legal will your mother thank you for pursuing it?
OutOfSync said:
JustinP1 said:
This is really sharp practice, I also didn't even consider that a UK dealer will allow you to buy a car from abroad without sorting the actual price for you. Otherwise, what is the point of the dealer?
The key of how to go forward is who *exactly* your contract is with - that is the written contract.
There is also the argument that the dealer has acted as an 'agent' of Abarth, which clearly they have.
It has been the law for a few years that unless a retailer is selling to a business that advertised prices must be VAT inclusive. Further to that, it could well be argued that the dealer should have informed you of these costs, either separately or as an agent of Abarth.
Which way you go down comes to the facts.
What would be useful is more information about the exact contractual structure here, as of course you need to sue the right people.
Agreed. Having reviewed the documents which my mother has given me, it seems likely that the contracting party was Abarth C SpA with Fiat London acting as either their agent or a branch office. The key of how to go forward is who *exactly* your contract is with - that is the written contract.
There is also the argument that the dealer has acted as an 'agent' of Abarth, which clearly they have.
It has been the law for a few years that unless a retailer is selling to a business that advertised prices must be VAT inclusive. Further to that, it could well be argued that the dealer should have informed you of these costs, either separately or as an agent of Abarth.
Which way you go down comes to the facts.
What would be useful is more information about the exact contractual structure here, as of course you need to sue the right people.
Slightly annoying as we'd much rather commence proceedings against a UK entity but still, I think that there is a strong case here against Abarth C SpA.
Does it mention by any chance the geographical location that the contract is presumed to be entered into, or the law in force? Many contracts will specify these factors.
All is not lost here. You do (on the face of it) seem to have a strong case - but - the devil is in the detail of the contract.
I remember a case I advised on maybe a couple of years ago where the OP started a thread after he already started a claim against the wrong party. He sued the manufacturer not the dealer in that case. But, simply due to the fact that he had proved that he is going to be a royal arse-pain that was enough to get a positive result.
In this case, you have two angles:
1) The losses incurred in negligent misrepresentation on the part of the dealer. The dealer clearly has a duty of care to inform a purchaser of the correct price that they will be charged.
2) My other angle would be to pass the bill onto the dealer with a strongly worded letter that they, or their partners should be paying tout-suite or they will both be on the end of legal action.
2) may very well be enough in this case.
OutOfSync said:
..sharp practice and I want Fiat to pay what they agreed to pay.
From what you've said, "sharp practice" seems a bit strong. "Cock up" would be more appropriate.Like others, I'm stuggling to imagine that no one noticed the car was £5K cheaper than it should have been.
We deal internationally at work although I don't deal much with the financial side, but surely even if the invoice to your mother was raised in Italy, it would have still had VAT on it, probably at a higher rate then we pay?
The dealer might have been able to defer the VAT if they paid for the car and then recharged your mother, but to not charge you VAT is an incredible mistake.
ETA: I just looked up the car model - all the hits on Google say it's £32K, and these special editions sell out as soon as they're released, so I'm even more incredulous that the fact that your mother was only charged £26.7K (which is £32K minus the £5.3K VAT being asked for) wasn't noticed at the time.
Great if you can get away with these things. But you got caught.
Edited by NPI on Wednesday 19th February 12:49
OutOfSync said:
Thanks for the responses all.
I think that before going into battle I need to establish:
3. Was Fiat London in breach of their duties to my mother by claiming that the car was price X when in fact it was X plus VAT? Could this give rise to a claim in itself?
4. If Fiat London is not the correct entity to sue, is it worth chasing Abarth C Spa in Italy re clause 3(iv) (Purchase Price) of the contract, or would it be prohibitively expensive?
I'd probably park 4 as a last-resort, as you may have to use Italian courts and the cost/benefit equation would rapidly evaporate.I think that before going into battle I need to establish:
3. Was Fiat London in breach of their duties to my mother by claiming that the car was price X when in fact it was X plus VAT? Could this give rise to a claim in itself?
4. If Fiat London is not the correct entity to sue, is it worth chasing Abarth C Spa in Italy re clause 3(iv) (Purchase Price) of the contract, or would it be prohibitively expensive?
3 is a key one for me - your mother is in the eyes of the law deemed a layman, whereas Fiat London (presume a dealer) is quite clearly not, therefore a court would view contractual relationships between the two parties differently to those between two "experts"...in other words, Fiat London could not be expected to easily rely on "but it said in the contract..." unless they'd made it explicitly clear what "it" is to your mother in lay terms.
JustinP1 said:
The key of how to go forward is who *exactly* your contract is with - that is the written contract.
There is also the argument that the dealer has acted as an 'agent' of Abarth, which clearly they have.
It has been the law for a few years that unless a retailer is selling to a business that advertised prices must be VAT inclusive. Further to that, it could well be argued that the dealer should have informed you of these costs, either separately or as an agent of Abarth.
THIS is also very relevant. There is also the argument that the dealer has acted as an 'agent' of Abarth, which clearly they have.
It has been the law for a few years that unless a retailer is selling to a business that advertised prices must be VAT inclusive. Further to that, it could well be argued that the dealer should have informed you of these costs, either separately or as an agent of Abarth.
I think the dealer would have to "prove" they weren't acting as agent, and furthermore I suspect separately they'd have to answer as to why they were doing this rather than just acting as a normal selling dealership, which is their business. A court would want to look into this latter point quite closely as it probably WOULD look unreasonable:-
"I know we sell Fiats all the time and have a UK franchise, but in this case we're going to let you go straight to the manufacturer..."
James P said:
Would this effectively make it a personal import and make the buyer responsible for accounting for the VAT? Abarth have exported the vehicle and would deal with any Italian taxes leaving the buyer to deal with import taxes.
Italy's in the EU. So a private non-VAT-reg purchaser would just pay the Italian VAT (21% before Oct '13, 22% after). A VAT-reg purchaser could give their GB VAT number to the retailer, then be charged a VAT-exclusive price, then the buyer pays the UK VAT straight to HMCR as part of their normal VAT return.I suspect that what's actually happened is something's got a bit confused with that. At a non-expert guess, the purchase VAT has been accounted for to Abarth Italy under Fiat (UK or dealer)'s UK VAT number, then the UK tax has never been paid. Fiat didn't charge your mother it, so HMCR are asking for it directly. Maybe there's a VAT number from the OP's mother's own business activities crept in there somewhere?
Either way, if this IS what's happened, then the VAT's definitely due.
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