VAT increase on gym membership

mjdell

Hi there. I wonder if you could give me some advice. In October of last year, I signed up for a 12 month membership with a gym. The agreement states that the 12 month membership costs £390, including VAT. This was to be paid by an initial instalment of £32.50, with the balance offered as interest-free credit, to be paid in 11 further monthly instalments of £32.50.

This was all going fine, but I noticed this month that they had increased the payment to £33.21. When I rang up to ask why, they said it was to cover the VAT increase. I objected and said they couldn't do that. I was told that they could, and they refused to accept there was anything wrong in what they had done.

I thought our contract meant that we had an agreement of what the first year's membership would cost, and they had then lent me the money to pay that there and then, and all I was doing for the remaining 11 months was repaying the loan, rather than actually paying membership - therefore the fact that VAT has gone up should have been factored into the original agreement, and doesn't affect my payments. If I'd bought a sofa on credit, I'm sure the payments wouldn't have increased on 1st Jan 2010!

Does this seem right, and what can I do about it? I could obviously write and complain, but can I do anything else, like seek to terminate the contract instead? I'm not impressed with how they've dealt with this, and would welcome the opportunity to walk away.

Thanks in advance

Mike

bryanb

VAT is applied at the time of the payment at the rate in force at the time. Companies have no discretion, it is a Government tax.

mjdell

I understand that. My point is that my monthly payments are payments on a loan, not payments for a service. The gym agreed the price for the membership last year, and then lent me the money to buy it, with me agreeing to pay them back. Therefore, I don't understand why the loan payments should increase just because VAT has gone up.

Mark_Hewitt

bryanb wrote: »

VAT is applied at the time of the payment at the rate in force at the time. Companies have no discretion, it is a Government tax.

That's not what is being asked if you read it.
The OP claims they believe that the 12 month membership fee was in fact paid before the VAT increase and all they are doing is paying off a finance agreement. Payments to service a debt are not subject to VAT and the transaction was before the change up again so subject to 15% VAT.

However it might be the case that the payments are not financed and they are simply paying a monthly membership fee subject to a 12 month contract.

It's worth reading the contract as if it states it is a specific price including VAT then they can't vary it just because the VAT has gone up, however it's almost certain they'll have a term in the contract saying they can vary the price subject to changes in tax etc.

bundly

This is 71p a month.

2p a day.

mjdell

Yes, that's true, but its still 2p/day I'd rather I had in my own pocket than theirs - surely that's one of the points of this forum?

bingo_bango

I agree with Mark Hewitt on this one. If this is repayment on a credit agreement, then the VAT has no bearing and an increase in VAT cannot affect the repyments.

If the monthly payments are for the service, then yes they can increase the VAT. It really does depend on which OP has, but as they seem sure that this is loan repayments, then there can be no increase applied.

biscit

I think the "interest free credit" may have been a way of saying the OP was committed to paying fees for a whole year.

DVardysShadow

Another way of looking at it is that the contract is agreed with a VAT inclusive price. The gym are laible for the VAT, because if VAT dropped, they would not be dropping their prices.

Hintza

biscit wrote: »

I think the "interest free credit" may have been a way of saying the OP was committed to paying fees for a whole year.

Think you are right here. The Gym haven't actually taken out any credit on this at all. So no finance involved.

Is it worth the fight?

pmduk

Check your agreement. If you are paying on a loan, then vat won't apply. If you're paying a monthly fee I reckon then it will.