Three mobile. VAT and Early Termination Fee.

tokaten · 15 April 2013 at 5:15PM

I left my contract 6 months early. Three are saying I owe 6 months. Fine. They have billed me inclusive of VAT for the ETF. The bill however says VAT at 0%. Three are saying this is an error and that it does include VAT. I think they are saying it's an error so it balances the books at their end as VAT should not be applied!

I've been on the phone for hours about this and spoken to a supervisor. He's insistent that VAT is applicable but can't explain why their bill says VAT 0% next to the ETF.

It's only around £15 but I feel there is an error with the way they calculate the ETF.

Has anyone had any experience of this with Three ? I feel like I'm banging my head against a brick wall! :mad:

Thanks

tokaten · 15 April 2013 at 5:59PM

Customer complaints just called. He is insistant that VAT is applicable to the ETF. He thanked me for pointing out that the charge stated 0% next to it. And that he would forward this textual error to the relevant dept.

I mentioned that Vodafone and Orange remove the VAT due to advice from Ofcom but he just directed me to the relevant section in Three's T and C's which state that they charge it.

Oh and he applied a 3% discount to the ETF of £2.80 that had been 'forgotten'.

grumbler · 15 April 2013 at 6:29PM

What advice from Ofcom?

In fact this is far from being that simple:
A very quick question re; VAT and termination
Paying off contract early....

JasonLVC · 15 April 2013 at 10:03PM

If the ETF is a penalty or fine then it is outside the scope of VAT (no VAT charged).

It is not a penalty or fine as I do not believe cancelling early is a breach of contract as the contract allow you to terminate it early..

If the ETF is the payment of your remaining contract (6 months), your contract is £x per month plus VAT.

VAT can only apply where the charging of it is linked to a supply given, so where you have no use of the phone as your contract is terminated, then you are not receiving a service and therefore VAT cannot apply.

Three are wrong.

Outside the scope of VAT is not a rate of VAT, whereas zero rate (0%) VAT is a rate of VAT so if Three are stating the ETF is zero rated they are really wrong, the list of things that can be zero rated is very short (pasties, newspapers, etc) and ETF's is not on th e list.

Go back to Three, email/write to them (don't waste your time with their useless Indian operatives) and keep pushing.

JasonLVC · 15 April 2013 at 10:14PM

http://www.hmrc.gov.uk/manuals/vatscmanual/vatsc35400.htm

"There is no supply for VAT purposes of “the right to terminate” or other such service where a contract originally contains a clause allowing the parties to terminate early in lieu of compensation for perceived losses arising from the termination."

tokaten · 16 April 2013 at 10:05AM

grumbler wrote: »

What advice from Ofcom?

In fact this is far from being that simple:
A very quick question re; VAT and termination
Paying off contract early....

Thanks. Yes I naively had assumed their advice was that VAT was non chargeable on ETF. I was wrong.

tokaten · 16 April 2013 at 10:06AM

JasonLVC wrote: »

http://www.hmrc.gov.uk/manuals/vatscmanual/vatsc35400.htm

"There is no supply for VAT purposes of “the right to terminate” or other such service where a contract originally contains a clause allowing the parties to terminate early in lieu of compensation for perceived losses arising from the termination."

Thanks JasonLVC. That's interesting. However they're sticking to the T and C's. Short of me threatening legal action there isn't much I can do. :mad:

JasonLVC · 16 April 2013 at 12:12PM

tokaten wrote: »

Thanks JasonLVC. That's interesting. However they're sticking to the T and C's. Short of me threatening legal action there isn't much I can do. :mad:

http://www.three.co.uk/_standalone/Link_Document?content_aid=1220457053001

The T&C's relating to cancellation fees does not mention VAT on cancellation fees, so in the absence of it being mentioned, how does that equal VAT becoming chargeable all of a sudden?

The Pricing Guide here points to small print notes http://www.three.co.uk/ThreePortal/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobnocache=false&blobtable=MungoBlobs&blobwhere=1223574258439&ssbinary=true

11. VAT is then calculated on the total of all charges that are VAT applicable.

The fact that it makes a distinction between VAT only applying where VAT is applicable, to me, shows that VAT is not just charged on everything.

Three are still wrong. Personally, I'd write to Three and ask for a deadlock response and take it to ADR (Alternative Dispute Resolution) http://www.ombudsman-services.org/communications.html

It costs nothing, so worth a punt. Appreciate the VAT is only a few quid, so you need to decide whether you want the added hassle and time of filling in forms or whether you can better spend your time enjoying life, although sometimes points of principles can go beyond common sense and logic and a wrong must be righted at any cost. Your decision.

tokaten · 16 April 2013 at 3:32PM

'It costs nothing, so worth a punt. Appreciate the VAT is only a few quid, so you need to decide whether you want the added hassle and time of filling in forms or whether you can better spend your time enjoying life'

I know. Feel like I've spent hours on this already so will let it go. It took nearly an hour just to get the PAC !

Buzby · 16 April 2013 at 3:49PM

VAT is always chargeable. There is no waiver because the contract was terminated early. IF the contract was waived, then there would be no charges to pay and as a result of this, no VAT either - but that is not what is happening.

The amount charged is still the balance of the agreement, as such VAT applies and must be accounted for. There is a side issue of a supplier MAY agree to the ETF being less than the £ x months left, due to the cancellation of the bundle. Not all do this, but if they credit a notional amount (say £3) then you need to be credited with the exclusive VAT element £2.60 AND the VAT.

However if there was no rebate, then the full value of VAT needs to be paid.

grumbler · 16 April 2013 at 4:42PM

"Always", "must", ....
You stubbornness and inability to read/listen amazes me.
Orange don't charge VAT on ETF and explicitly say this in the bills.

Three mobile. VAT and Early Termination Fee.

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