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Skoda Karoq - Stealth Tax for motorists? - Alex Grieve

In November I ordered a new car. The “List price” (manufacturer’s price, factory fitted extras) was well inside the £40,000 threshold at which additional Vehicle Excise Duty (VED) has to be paid annually from years 2 to 6 inclusive. Normal delivery might have been expected in mid February (13 weeks) but due to the global shortage of microchips did not happen until mid May (22 weeks).

On collecting the car, the agreed price and the trade in value of my old car were honoured but I discovered that the manufacturer’s price had increased on the 1st April. I am therefore deemed to have bought the care at the new price, which I did not, but that was now £40,300 and therefore obliges me to pay the additional VED in future.

This means that I am deemed, on a hypothetical consideration, to have paid a notional price and the errant £300 excess will add to the costs of motoring £1,850 over the life of the car.

There may be others who find themselves in this situation. It is not one of which either I or the dealership seemed aware, and there may yet be time for anyone yet to collect a car in such an arrangement to withdraw.

Alex Grieve

Skoda Karoq - Stealth Tax for motorists? - badbusdriver

I think I'd be getting some legal advice if I was in your position

Even though you may not have paid, or started to pay, for the car till after the price hike, you "bought it" (as in, agreed on the price, signed the dotted line etc) before.

Skoda Karoq - Stealth Tax for motorists? - Bromptonaut

I think I'd be getting some legal advice if I was in your position

Even though you may not have paid, or started to pay, for the car till after the price hike, you "bought it" (as in, agreed on the price, signed the dotted line etc) before.

Worth a punt but I suspect the Terms & Conditions you signed allow them to reflect increases list prices between order and delivery.

Skoda Karoq - Stealth Tax for motorists? - catsdad

The tax applies from date of registration. It doesn’t matter when the deal was done or even if the payment was made in advance. While it’s unfair in some ways I can’t see how they can do it any other way. If the govt allowed for the original order date etc you’d have every dealer in the country exploiting this as a sales ploy. So the govt. use the date of first registration as a legal definitive date that they can relate to the manufacturer list. No ifs, no buts.

You‘ve done well if the dealer honoured the original deal as I suspect they might have had something in their T&Cs allowing them to charge more. You could try a goodwill contribution from the dealer but I suspect you’d get nowhere. Their T&Cs will protect them from tax rule changes.

One way of looking at it is you saved on the price paid by their honouring the original deal. Does that balance out the tax?

Skoda Karoq - Stealth Tax for motorists? - sammy1

I agree it is a stealth tax something that is really beyond your control and you could not foresee due to circumstances. This VED has been stuck on £40k list price for some time now and the starting band is not moving with new car prices. Meanwhile VED increases annually.. Personal tax allowance also stuck bleeding us dry paying for the mistakes of Gov.

Skoda Karoq - Stealth Tax for motorists? - movilogo

If the list price when ordering is just below £40k, then there is a risk that it will be over £40k.

Either be ready to pay the extra tax or order a car which is priced well below £40k mark so no risk of going over £40k during delivery.

£40k is too low, in line with inflation this should be £50k now!

Skoda Karoq - Stealth Tax for motorists? - alan1302

I agree it is a stealth tax something that is really beyond your control and you could not foresee due to circumstances. This VED has been stuck on £40k list price for some time now and the starting band is not moving with new car prices. Meanwhile VED increases annually.. Personal tax allowance also stuck bleeding us dry paying for the mistakes of Gov.

It's not a stealth tax - it's a known a bout tax that applies when you pay over £40k for a car....nothing stealthy about it.

Skoda Karoq - Stealth Tax for motorists? - Alex Grieve

A collection of excellent, and largely sympathetic responses. Thank you.

The dealer did not increase his price to me, he honoured our agreement. If he had increased his price to me, which he had no intention of doing, I had a get out clause in the agreement and could have walked away.

The manufacturer increased list prices on 1st April, and DVLA deem me to have paid that increased price. Deem = fiction, sadly.

I agree it is a well known tax but did not realise it was applicable in this fashion. Indeed, there is no publicly available definition of list price - believe me, I have tried to find one Every motoring authority tells me List Price = Manufacturers recommended price plus factory fitted extras. Only on contacting DVLA does it emerge that Delivery Charges are included, and they make all the difference in this case. So to say it is a well known tax is only part of the story.

It is also noteworthy that in these elements of "List price" there is also substantial tax, so we have here a further case of a "tax on a tax".

My saving by paying the pre-increase list price does not cover it, sadly, but a kind thought.

Skoda Karoq - Stealth Tax for motorists? - Bromptonaut

The government has an explicit policy, certainly so far as Income Tax is concerned, of not increasing thresholds for tax.

The real world value of the allowances decreases and people who were, as a matter of previous policy moved out of the tax net find themselves back in it. The technical term id fiscal drag.

Suspect this is the same.

Skoda Karoq - Stealth Tax for motorists? - John F

The manufacturer increased list prices on 1st April, and DVLA deem me to have paid that increased price. Deem = fiction, sadly.

No, 'deem' apparently means 'regard in a specific way'. As someone who has relied upon HMG for the bulk of their income and who is now one of the millions of the 'something for nothing' brigade who are supported by HMG (whose net debt is now more than 100% of GDP), I think anyone wealthy enough to spend £40K on a motor car will probably not notice the extra 5% of £40K spread over five years.

Skoda Karoq - Stealth Tax for motorists? - Alex Grieve

A worthy suggestion John, but at no point was the car I agreed to buy over £40K and I did not pay over £40K. I was deemed to have paid over £40K for administrative purposes and smacks to me as a bureaucratic fiction and convenience.

I guess the alternative, following a point made by carsdad, would have been to have paid the full price at the point of ordering, merely collecting the car after the 1st April - a strategy common in business to facilitate balance sheet purity.

I am thoroughly enjoying the car, thank you, and appreciate that I am sufficiently well off to be able to afford a car costing nearly £40K. Money is hard earned and should not be squandered either on excessively expensive super-cars or on taxation invisible at the time I agreed the purchase.

The opportunity to contribute to the welfare of those less well off than me is also appreciated, but I would prefer if had been done voluntarily by me rather than coercively by sleight of hand.

Edited by Alex Grieve on 26/06/2023 at 12:23

Skoda Karoq - Stealth Tax for motorists? - catsdad

I didn’t suggest paying upfront, quite the opposite. It would make no difference. The tax applies at the date of registration, not payment.

Your situation is annoying but I don’t think you could have avoided the tax once other than cancelling the order.

Skoda Karoq - Stealth Tax for motorists? - Alex Grieve

Sadly that is correct. This came as a surprise to the dealer (who struggled to explain it) and to me.

I guess the health warning in future must be to all motorists who order a car, if the Manufacturers prices change, you must confirm what the resultant "List price" will be, in order to then consider cancellation.

That level of forethought was not available in this case.

Skoda Karoq - Stealth Tax for motorists? - Manatee

It's the very definition of a stealth tax - more and more get caught every year with any change to the rules.

Skoda Karoq - Stealth Tax for motorists? - mcb100
The new Renault Austral I’ve just given back has a list price of £39,495 for the top grade. If you have it in white. Add a metallic or matte paint and it’s over the £40,000 VED threshold for an additional £390 per annum for the first five years.
Skoda Karoq - Stealth Tax for motorists? - sammy1

"""Car buyer stung with extra £2k to tax VW that turned up 20 months late (msn.com)

This article gives a good explanation. Customers New car list price went up a whopping 10% since ordering. Garage honoured the original deal but again stung for the extra VED. There must be quite a few out there and I suspect some are still to find out!

Skoda Karoq - Stealth Tax for motorists? - alan1302

"""Car buyer stung with extra £2k to tax VW that turned up 20 months late (msn.com)

This article gives a good explanation. Customers New car list price went up a whopping 10% since ordering. Garage honoured the original deal but again stung for the extra VED. There must be quite a few out there and I suspect some are still to find out!

He is paying less than the actual increase in the cost of the car should be though so overall he has done ok with it.

Skoda Karoq - Stealth Tax for motorists? - sammy1

"""Car buyer stung with extra £2k to tax VW that turned up 20 months late (msn.com)

This article gives a good explanation. Customers New car list price went up a whopping 10% since ordering. Garage honoured the original deal but again stung for the extra VED. There must be quite a few out there and I suspect some are still to find out!

He is paying less than the actual increase in the cost of the car should be though so overall he has done ok with it.

No he hasn't he agree a contract for a price and has been stung by a stealth tax. He is going to pay a lot more every year to tax his car through no fault of his.

Skoda Karoq - Stealth Tax for motorists? - Crescends@hotmail.com

Yep the government web site states ' Vehicles with a list price of more than £40,000 - You have to pay an extra £390 a year if you have a car or motorhome with a ‘list price’ (the published price before any discounts) of more than £40,000. You do not have to pay this if you have a zero emission vehicle.You only have to pay this rate for 5 years (from the second time the vehicle is taxed). It doesn't mention its based on when the car is first registered!

This tax was introduced on 1st April 2017 (I wonder if the first of April is significant!) when the price of £40K was set. We are 6 years, 4 months on from then with significant inflation but the £40K remains the same! The pound had an average inflation rate of 5.08% per year between 2017 and today, producing a cumulative price increase of 34.59%. My suns mean that's a £13,836 increase, so the list price to go by should be £53,836!

Skoda Karoq - Stealth Tax for motorists? - sammy1

"""This tax was introduced on 1st April 2017 (I wonder if the first of April is significant!) when the price of £40K was set. We are 6 years, 4 months on from then with significant inflation but the £40K remains the same! The pound had an average inflation rate of 5.08% per year between 2017 and today, producing a cumulative price increase of 34.59%. My suns mean that's a £13,836 increase, so the list price to go by should be £53,836! ""

Entirely agree. The £40k must be stifling the new market for private buyers and more so for those hoping to pick up a car with a balance of the 5 years VED to pay. Again a silly subsidy for those with the money to buy an expensive EV no VED.

Skoda Karoq - Stealth Tax for motorists? - Bromptonaut

Entirely agree. The £40k must be stifling the new market for private buyers and more so for those hoping to pick up a car with a balance of the 5 years VED to pay. Again a silly subsidy for those with the money to buy an expensive EV no VED.

The OP speaks of additional cost of <£2k over the life of a car, in practice it's spread through the first few years ownership.

Compared with what you lose in depreciation and spend on fuel, service etc it's a nugatory amount.

Skoda Karoq - Stealth Tax for motorists? - Terry W

It is not a stealth tax - it has been applied consistently for many years and should come as no surprise.

By definition any tax based upon a threshold will disproportionately affect those who find themselves around that level - either just below or just above. It is absolutely no different to (say) higher rate tax thresholds, national insurance rates, benefits caps etc.

That it is based on the list price of a car when registered has been a matter of fact for several years. That in a period of relatively high inflation, car prices will increase should come as no surprise. That the threshold has not been updated with inflation is nothing new.

I can understand being upset by events - had the car been delivered sooner it would be a non-issue. Life is full of surprises - some good, some unpleasant, and some disastrous. This sits comfortably in the middle.