I was offered a £2000 discount on a new car - is the dealer allowed to reduce this discount because of VAT?

I just purchased a new car and was offered a dealer discount of £700, plus a dealer partner discount of £1300, making a total of £2000. The invoice shows a reduced amount, which when queried, was advised that it was less with VAT. The VAT charged doesn’t include the VAT on the above figures, so it looks as though they are charging the VAT but it is not on the total VAT bill for the car. My understanding is that VAT is not due on the discounts given. Can you clarify this, please?

Asked on 15 January 2018 by Phil

Answered by Honest John
You are presumably a private buyer. So VAT is charged as an element of the price you pay. Whether that's the result of discounts or dealer volume bonuses is irrelevant. It's still a component of the price you pay.
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