HM Revenue & Customs has confirmed that the rate of VAT will be returning from 15% to 17.5% on January 1 next year, but if you are planning to buy a new car there are ways to beat the increase.

According to an investigation by What Car? magazine, you will pay VAT at 15% when you order a new car and:

• Pay for and register it by the end of 2009.
• Pay for it in full before the end of the year and register it in 2010 within six months of placing the order.
• The dealership raises a full VAT invoice before the end of the year and pays the 15% tax at their next VAT return. In this case, you would not have to pay the full balance by the end of the year.

However, you will pay the increased rate of VAT if:

• You order a car in 2010.
• You order a car now and pay the balance in 2010.
• You order a car now, a VAT invoice isn't raised by the dealership, or the tax due isn't paid, by the end of the year.
• You order a car now, a VAT invoice is raised and paid, but you ask for delivery to be delayed – perhaps to get the new registration plates in March or September.
• The car you order is delivered six months or more from order.
• The car you order is worth more than £100,000.

Most car manufacturers are currently highlighting the savings to be made by beating the VAT increase.  With VAT still at the reduced rate and the scrappage allowance still in place, there has never been a better time than now to buy a new car.