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Buy now to avoid VAT rise

Buy now to avoid VAT rise

Buy now to avoid VAT rise

After hard economic times, the government made a bold decision to cut VAT to 15% - the lowest level in 20 years, in an attempt to stimulate economic growth.

However, now that Britain has struggled its way out of recession it's payback time, so VAT will be rising to 20% from January 4 2011 in order to balance Britain's books.

With the increase just around the corner, there has been a lot of debate about how to reduce the impact on consumer funds.Buy now to avoid VAT rise


Several auto brands are rolling out high-profile marketing campaigns targeting sales before the increase, which is likely to put pressure on new year sales.

Land Rover is the most recent manufacturer to offer its customers protection against the rise.

However, there are ways for all consumers to avoid paying the extra 2.5% on certain purchases, including cars delivered up to six months after the hike.

If you place your order before January 4, a tax point can be created, which means the purchase is liable to be taxed at the 17.5% rate. This even applies if the payment isn't made until the delivery of the car, which can be up to six months after the order date. This won't apply if you choose to pay on finance, but it does cover those using a personal loan.

Unfortunately this loop-hole won't apply everywhere, as some car dealers either don't understand it or may refuse to process the deal in this way because a VAT invoice will be required and they may have to pay the tax due before full payment is received.

According to one survey there is a lot of confusion among car dealers on this matter. In the survey, 30 dealers were contacted and asked whether the VAT rise could be avoided. The results suggested that the dealers were not well informed, with confusion on dates and contradictory opinions.

Many were under the impression that it could only be avoided if the full balance was paid before the beginning of the new year, or if the car was registered this year, and some said it could not be avoided at all.

For those that are looking to make any other big purchases next year but don't have the cash up front, it may be worth considering 0% purchases credit cards.

Simply make your purchase using the card then as long as you pay at least the minimum monthly payments and the balance is cleared before the 0% duration ends, you will save 2.5% and you won't have to pay any interest for the privilege.

The Tesco credit card currently offers 13 months 0% on purchases which means the balance could be broken down into 13 monthly instalments.
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