I dont know if its illegal or not but charging the VAT on top without stating this is not ethical.

As we all know, new cars attract VAT. The vast majority of used cars, as Zippy says, are VATable on the dealer's margin. However some used cars are classified as "VAT qualifying"; whilst I'm not 100% certain, this is my understanding:

Where the car is first bought (ie as new) by a business who has successfully argued his case that he can reclaim the VAT element of the car, when it is re-sold, this price is plus VAT. When it is subsequently re-sold, VAT is applied to the margin as usual, thus no VAT to the purchaser.

So, civilservent, if the car is a VAT qualifying car it will be plus VAT but if not or if the person you are buying it off was not the original owner then no VAT is chargable to you. If the latter the vendor is clearly trying to take you for a ride.

Good luck

Does the dealer specialize in cars or commercial vehicles (vans etc)?

Van sales are normally always plus VAT but never heard of a car sale plus VAT.

Edited by a900ss on 23/10/2010 at 21:34

http://www.hmrc.gov.uk/vat/sectors/consumers/basics.htm

seems to say that the price displayed must be with the VAT element (either plus or inclusive). There is another section on the retail motor trade but this is regarding where & when to charge VAT, & does not state that different rules apply to the labeling of the goods.

"that a main dealer like this wouldn't blatantly break the law "

ha! ha! ha! ha! Main dealers, like every other dealer in the country break the law regularly

I was at a dealer the other day getting a key sorted out, and when I asked about the VAT element on a 2nd hand car, he looked at me as if I was a simpleton and said that there was no VAT in 2nd hand cars. I mentioned the dealer's margin scheme and he still looked at me as if I was a simpleton.

I guess he had no idea of what I was talking about. This was compounded by him saying that when the soft roader engaged a low ratio gear box when it went from 2WD to 4WD.