If I use Mercedes-Benz servicing cost plan, do I pay VAT twice?

In May 2012 I purchased a nearly new C-Class from Mercedes-Benz Retail. Shortly after I received a call inviting me to spread the servicing costs for two years for £22.50 per month. After signing up for this scheme, I have realised that I am paying VAT at 20 per cent on this payment but in reality I am losing this each month. Overall, over the 2-year period, I shall have wasted £108. When I come to service the car I suspect I shall be charged another VAT payment of 20 per cent so effectively will have paid two amounts of VAT. Is the moral to save the full amount in a bank then I should have more to pay the service costs?

You only pay the 20 per cent VAT once. If you find proof that you have paid it twice then the dealer is guilty of VAT fraud and you can report him to HMRC.

Answered by Honest John on 16 March 2013

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