Slightly - Vehicle invoice discrepancy
Discussion
Hi Folks,
yes, this is slightly O/T, but please bear with me.
A couple of weeks ago my mum P/X'ed her camper van in for another, larger model. The dealer in question made her an offer on her existing one, leaving a balance to be settled. e.g. her existing van was worth 15k, and the new one 20k, so she owed them 5k. She paid this, and they issued her with a final invoice on the vehicle. Since getting her new van home was her main point, and that the dealer had not asked for any more than she was paying she did not check the amounts, but getting home found that they had infact valued her van at nearer 12k, and with the 5k she paid made her new van invoice value at 17k.
When she called to query this, she was told "Your husband and son are both in business, they will tell you this is standard practice to defer payment of tax, it is nothing to worry about, and should you have a problem we will give you a good valuation on your van, ignore the invoice".
Now I am unhappy with this response, and feel that while my mum was not directly ripped off (although they did her no favours on the valuation on her old van) there is an issue here that the dealer is making her party to his fraud.
Any suggestions as to the best way forward. I have considered going back to the dealer, or contacting their head office to talk to their finance director, or is this something for trading standards.
Any advice welcome, except for flak or nob gags!
Chris
yes, this is slightly O/T, but please bear with me.
A couple of weeks ago my mum P/X'ed her camper van in for another, larger model. The dealer in question made her an offer on her existing one, leaving a balance to be settled. e.g. her existing van was worth 15k, and the new one 20k, so she owed them 5k. She paid this, and they issued her with a final invoice on the vehicle. Since getting her new van home was her main point, and that the dealer had not asked for any more than she was paying she did not check the amounts, but getting home found that they had infact valued her van at nearer 12k, and with the 5k she paid made her new van invoice value at 17k.
When she called to query this, she was told "Your husband and son are both in business, they will tell you this is standard practice to defer payment of tax, it is nothing to worry about, and should you have a problem we will give you a good valuation on your van, ignore the invoice".
Now I am unhappy with this response, and feel that while my mum was not directly ripped off (although they did her no favours on the valuation on her old van) there is an issue here that the dealer is making her party to his fraud.
Any suggestions as to the best way forward. I have considered going back to the dealer, or contacting their head office to talk to their finance director, or is this something for trading standards.
Any advice welcome, except for flak or nob gags!
Chris
There are three possibilities here . . .
1) The amounts on the invoice exclude VAT, whereas the discussion beforehand included VAT (12k + VAT = £14.5k) (£17k + VAT = £20k)
2) The garage is trying to save tax by declaring a lower sale value (difference between VAT on £20k vs £17k)
3) The garage just wanted to make it look like you got a very good deal. I know some car dealers who offer incredibly high trade-in prices to get the customers in, but who also charge incredibly high prices for their used stock. Overall the price differential stays close to the same.
1) The amounts on the invoice exclude VAT, whereas the discussion beforehand included VAT (12k + VAT = £14.5k) (£17k + VAT = £20k)
2) The garage is trying to save tax by declaring a lower sale value (difference between VAT on £20k vs £17k)
3) The garage just wanted to make it look like you got a very good deal. I know some car dealers who offer incredibly high trade-in prices to get the customers in, but who also charge incredibly high prices for their used stock. Overall the price differential stays close to the same.
This happened to me about 6 years ago when I traded my first Corrado in for my current one.
I queried it, and they gave me a letter addressed "to whom it may concern" that they had been advertising my car for several weeks at the sticker price I'd paid and that this was a fair and reasonable value for the car.
Just enough to give me some sort of proof that the car was worth what I'd paid, but not quite enough to incriminate them.
I think you're right - this is probably fairly standard (and dodgy) practice on P/X.
I queried it, and they gave me a letter addressed "to whom it may concern" that they had been advertising my car for several weeks at the sticker price I'd paid and that this was a fair and reasonable value for the car.
Just enough to give me some sort of proof that the car was worth what I'd paid, but not quite enough to incriminate them.
I think you're right - this is probably fairly standard (and dodgy) practice on P/X.
Would your mum still have bought it had the salesman said on day one "look thats worth 5k we'll give you 2 and the new ones worth 20 but we'll sell it for 17" it's all swings and roundabouts and walks the fine line between Tax avoidance and evasion, one is legal and good business practise and the other can see you sent to jail. Personally I wouldn't care as far as your mum is concerned she got a shitty px deal but a cracking deal on the new van end of story. She is not involved in any fraud what so ever.
I agree with Mel. Your Mum isn't implicated here but the vendor, on the face of it, is suppressing income for VAT and corporation tax reasons.
I think the only thing to concern yourself with is whether or not you feel the need to "do the right thing" by informing Revenue and C&E.
For the record, C&E do test purchases (including reastaurants
) so they can verify amounts in accounts at a later date. They may already have an eye on your vendor.
I think the only thing to concern yourself with is whether or not you feel the need to "do the right thing" by informing Revenue and C&E.
For the record, C&E do test purchases (including reastaurants
) so they can verify amounts in accounts at a later date. They may already have an eye on your vendor.You'll probably find that the figures on the order form match those on the invoice - hence there is no question of fraud here.
The dealer should however have explained that the figures on the invoice may not actually match what had been agreed, but that the "cost to change" would remain the same.
The dealer should however have explained that the figures on the invoice may not actually match what had been agreed, but that the "cost to change" would remain the same.
i am not sure the dealer is doing anything wrong
he can reclaim his vat - just acts as a collector - the customer pays vat ... so at 17k yes you pay ultimately less vat in absolute terms i agree - but the dealer can sell goods for whatever price he likes it is not fraud.
anyway - 20k = 3500 vat 17k - 2625 vat
van @15k = 2975 vat or 12k = 2100 vat
either way the difference is the same - £875 vat which s the absolute amount collected here.
the real differnece is the dealer can now ship the van at at a trade price - like 13k and still appear to have turned a profit.
As far as I can see there is no fraud here - just some smart discounting. - every car dealer in the land does this ! - but these guys should have been more upfront about it
he can reclaim his vat - just acts as a collector - the customer pays vat ... so at 17k yes you pay ultimately less vat in absolute terms i agree - but the dealer can sell goods for whatever price he likes it is not fraud.
anyway - 20k = 3500 vat 17k - 2625 vat
van @15k = 2975 vat or 12k = 2100 vat
either way the difference is the same - £875 vat which s the absolute amount collected here.
the real differnece is the dealer can now ship the van at at a trade price - like 13k and still appear to have turned a profit.
As far as I can see there is no fraud here - just some smart discounting. - every car dealer in the land does this ! - but these guys should have been more upfront about it
This has been going on in the trade for years. It is known as "writing back". The profit element on a vehicle which is not sold at £xxxx plus VAT (in other words not commercial vehicles) is subject to a VAT payment. So, if this camper van cost the dealer say £16k and he sells it for £20k, making £4k profit, that sum is a VAT inclusive profit. So, from the £4k he has to give the C+E £595.75. If he writes it back to £17k on the invoice, making an apparent £1k profit, he is due them £148.94. If a trade in is overpriced to conclude the deal and the dealer then sells it at less than he showed on the invoice there is no reclaimable VAT on the loss he made. It is really a way of making sure that they are not caught out and sacrifice some of their profit unnecessarily to the C+E. I hope I have managed to explain this in a way that makes sense.
It is not intrinsically wrong, as it is only dealing in real values. Many years ago I set up a sideline business dealing in used 4x4 s. The idea was to sell at keen prices (ie the real retail value) but also offer real prices on trade ins. We quickly changed this when we realised that most people were only interested in a perceived high trade in price on their old vehicle and were largely unaware of the true value of their new one. Outwith those who enjoy the enthusiast attitude and understanding, not many realise that the difference to change is all that actually matters.
The dealer should have explained his actions to avoid himself the problem which he may now have. In truth it makes no difference to anything what the invoice shows from your point of view.If the vehicle is stolen, the ins. co. will only pay market value at best, regardless of any high priced invoice somebody may produce. My advice would be that if your mother was happy with the price to change (as she must have been to do the deal) then forget about it as it is really a completely meaningless piece of paper anyway !!
>> Edited by RUF 3 on Saturday 5th October 09:27
It is not intrinsically wrong, as it is only dealing in real values. Many years ago I set up a sideline business dealing in used 4x4 s. The idea was to sell at keen prices (ie the real retail value) but also offer real prices on trade ins. We quickly changed this when we realised that most people were only interested in a perceived high trade in price on their old vehicle and were largely unaware of the true value of their new one. Outwith those who enjoy the enthusiast attitude and understanding, not many realise that the difference to change is all that actually matters.
The dealer should have explained his actions to avoid himself the problem which he may now have. In truth it makes no difference to anything what the invoice shows from your point of view.If the vehicle is stolen, the ins. co. will only pay market value at best, regardless of any high priced invoice somebody may produce. My advice would be that if your mother was happy with the price to change (as she must have been to do the deal) then forget about it as it is really a completely meaningless piece of paper anyway !!
>> Edited by RUF 3 on Saturday 5th October 09:27
RUF is right, its a standard practice. Although the norm is that the dealer will tell you before he has done it, or, if he has the systems in plavce do it internally afterwoods.
BE WARNED as RUF says the insurance will only pay market value but, should your mother have GAP insurance that pays the difference between any amount payed out by the insurance company and the 'value' of the van the gap insurance company will only pay to invoice value.
For piece of mind personally I would insist that she has an invoice quoting how she originally agreed the deal and let the dealership "write it back" internally.
She wont't be very popular but hey thats life.
They should have explained it better.
>> Edited by funkyboogalooo on Saturday 5th October 11:53
BE WARNED as RUF says the insurance will only pay market value but, should your mother have GAP insurance that pays the difference between any amount payed out by the insurance company and the 'value' of the van the gap insurance company will only pay to invoice value.
For piece of mind personally I would insist that she has an invoice quoting how she originally agreed the deal and let the dealership "write it back" internally.
She wont't be very popular but hey thats life.
They should have explained it better.
>> Edited by funkyboogalooo on Saturday 5th October 11:53
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