MSE News: Virgin Media uses VAT rise to retrospectively hike phone prices

Former_MSE_Guy

corbyboy wrote: »

Guy, as news editor you really need to be careful about the things that you say. Especially when they are factually incorrect.

As I stated in post 12 Virgin Media have generated the bills exactly as they are supposed to. Just because BT and the others have done it differently which is to the customers', doesn't mean they are right.

Here is the quote again:


Can you please explain why the above should not be applied to phone bills?

Hi folks,

quote from HMRC website: "If your customer pays on or after 4 January 2011 for something they took away (or you delivered) before 4 January 2011, your sale took place before 4 January 2011 and you should use the 17.5 per cent rate."

The rules are different for a continuous service (such as line rental) but this story is not about line rental.

Some people on this thread have used a comment from a different story out of context. That story was specifically about beating the VAT rise for people buying goods pre-4 January 2011. We were making the point that if they paid in advance for an item that was delivered post-4 Jan they may still get the lower VAT rate.

In retrospect, reading it back, even though that sentence in the earlier story was verified by HMRC, we could have made it clearer that it was not an all-encompassing statement about VAT.

Virgin even accepts now (though it didn't say so specifically when asked prior to publication) that, and I quote, "what we have done isn't ideal". It seems its systems could not cope with being able to split calls to account for the two VAT periods.

And I'm afraid I can't quite see the point made by the people posting who can't see this as a price rise.

When we buy items from a store, telecoms company or wherever, unlike in the US, we are usually quoted a single price which includes tax so we think of prices as a single price generally (apart from in certain trades such as the building trade - in my experience, anyway). In the US you are normally quoted the base price and tax is then added at the checkout.

Virgin's website lists call costs as the total price, not the base price + VAT.

As a result of Virgin's actions its customers (many of whom have complained via email to us about the rise, so they see it as a rise) are paying more money for a service. To me, that's a rise.

Hope that clears it up and happy weekend to all.

liam8282

Suppliers of goods or services have the option of how to calculate the VAT for the new 20% VAT rate.

Here Virgin are doing nothing wrong, they are acting within the HMRC guidelines, applying the current VAT rate at the invoice tax date.

It will have been impractical and very costly for them to calculate each individual customers bill up to 3 January for the 17.5% rate, and another bill from 4 January.

Virgin Media are not using the "VAT rise to retrospectively hike phone prices", they are merely choosing to calculate VAT in one of a number of ways as set out by HMRC.

The MSE story leads us to believe that Virgin have done this to gain some sort of profit out of its customers due to the VAT rise, but any extra VAT that is paid by the customers will be payable to HMRC anyway.

Virgin could probably have chosen a better, more customer friendly, calculation for VAT. But even using the method they have chosen, they are doing nothing wrong.

marshallka

liam8282 wrote: »

Suppliers of goods or services have the option of how to calculate the VAT for the new 20% VAT rate.

Maybe so but the consumer is the one to lose out as I see it!!!

liam8282

marshallka wrote: »

Maybe so but the consumer is the one to lose out as I see it!!!

Blame HMRC, or the govt for raising the VAT rate, it is their guidelines that are being followed here.

Virgin definitely will not be the only business applying VAT using this method, but it is the only one that has been attacked in this MSE story.

For example a tradesman started work at your house 20th December, worked for a day, broke up for Christmas. Started back 4 January, finished 7th January.

He bills you on 7th January and uses 20% rate. Now according to this MSE story he is ripping you off and increases his work rate to swindle you out of cash, when in reality he is using the HMRC guidelines to calculate VAT. Because he does not want two separate bills or two separate calculations for VAT, and you didn't ask him to bill you on 20th for that days work etc. All perfectly reasonable, no big conspiracy to rob the customer.

IMO this story is just very unfair to Virgin, it does not give all the facts, and generally isn't what I would expect from this site.

The whole topic is a debate over what will be a matter of pence to most Virgin customers.

& let's get it straight it is a rise in VAT, not a rise in Virgin call charges, Virgin will be no better off in any of this.

Milarky

MSE_Guy wrote: »

The money goes to the taxman but it still means consumers are overcharged as they should be paying the 17.5% rate.

This is a misconception about 'who pays' VAT. IF you're not a VAT registered company - which needs to 'collect VAT' why would you choose to pay 'VAT' to a company claiming to do so that just prints 'VAT@17.5%' (or '20%') under the 'bill for service'?

The customer [not a company for VAT purposes] accepts a service which is 'price inclusive'. It makes no difference whether VAT is 'due' on any element of that service or none of it - because the company pays VAT not the customer.

So when VAT goes up Virgin (or whoever) merely 'reprices' their product according to whatever contract exists - which presumably covers changes in VAT rates as a standard term. If they are 'fair' they will re-price so that it appears the customer 'pays' VAT at the 'correct' rate. But legally speaking customers aren't paying the VAT at all, they are compensating the company for having to.

IS is possible, I wonder, to become a VAT registered person - so that every time you buy something with VAT in it you can recover that or offset it in some way? [Probably not, but just thought I'd check]

mumsybear

I am spitting feathers! Rang Virgin to ask for a refund on my December bill (received 5 January). First staff member left me on hold for 10 minutes, until I rang off. Second one point blank refused to consider a refund and suggested I write to Head Office. How far do I go with this as a point of principle?
I would love to know how my fellow Bedfordshire dweller managed to get ONE POUND back from them!

Altarf

I expect better from MSE.

The correct information can be found at - http://www.hmrc.gov.uk/vat/forms-rates/rates/rate-rise-guidance.pdf#page=10 in section 3

3 SPECIAL RULES FOR SALES THAT SPAN THE CHANGE IN RATE

Under the normal rules, standard rated supplies with tax points created by payments received or VAT invoices issued on or after 4 January 2011 will be liable to the 20 per cent rate.

However, there are optional change of rate rules that you may be interested in applying. You can apply the rules selectively to different customers. Also, you can adopt them without notifying HMRC.

Note: The special change of rate rules are optional – you do not have to apply them and you are unlikely to want to if your customer can recover all the VAT you charge them (unless it is administratively more convenient for you).

3.1 How do the rules work?
3.2 Goods or services provided before 4 January 2011
The change of rate rules may be used where you provide goods or perform services before 4 January 2011 and raise a VAT invoice and, in some cases, receive a payment after the rate change.

So, for example, if you issue a VAT invoice on or after 4 January 2011, for goods you provided, or services that you completed before 4 January 2011, you can, if you wish, apply the 17.5 per cent rate.

You can decide to apply these rules even after you have issued a VAT invoice showing 20 per cent VAT. If you do, you must issue a special credit note giving credit for the extra 2.5 per cent VAT, within 45 days of the rate change (i.e. by 17 February 2011). The credit note details required are given in section 2.5 above. You should not cancel the original invoice.

I deliver a computer to a customer on 29 December 2010 when the VAT rate is 17.5 per cent. On 6 January 2011 I issue a VAT invoice in respect of the sale. What rate of VAT do I charge?

Under the normal tax point rules 20 per cent VAT is due as the invoice was issued after the increase in the rate and within 14 days of the supply of the computer. However, under the special rules you may decide to charge the 17.5 per cent standard rate of VAT which was in effect when the computer was delivered. This will reduce the amount of VAT you are liable to account for on the sale. If your customer is VAT registered and able to recover the VAT charged in full the use of the special rules will not save them any tax.

I carry out a service on a car on 29 December 2010 and on 7 January 2011 I issue a VAT invoice to my customer. Can I charge VAT on this supply at 17.5 per cent?

Yes. The position here is the same as in the previous example.

As the document says, the rules are optional, and Virgin Media have opted not to use them. So legally nothing wrong, but not exactly customer friendly charging your customers tax that they need not have paid.

However at least Virgin Media are paying this money over to the government and not making a profit out of it, unlike the petrol retailers who increased the price of fuel on the 1st January before they had received a new delivery.

Gorgeous_George

The big question is 'What did Virgin Media do when VAT was reduced to 15%?"

However, my favourite bit from Guy's sensational story is this bit quoting a Virgin Media spokesperson ...

In order to make these increases as manageable for our customers as possible, we have rounded down the VAT increases to the nearest penny.

What on earth does that mean?



You can take the man out of the Daily Mail but you can't take the Daily Mail out of the man.


(Desperate Dan's biography).

GG

liam8282

Gorgeous_George wrote: »

The big question is 'What did Virgin Media do when VAT was reduced to 15%?"

There were also several options available when the VAT rate changed to 15%.

Companies had the option on how to apply the rate change, just as they do now.

I presume Virgin would have applied the VAT rate at the invoice date, as they have done now. If they did I can't remember a big story about Virgin cutting their rates to give customers a discount?!

But if someone could confirm this, it would clear up the big conspiricay theory that Virgin are robbing all of their customers out of a couple of pence to boost their income!

chattychappy

VAT, like income tax via PAYE is a tax on people the administrative burden of which is dumped on companies.

I've got every sympathy with Virgin for taking the easiest route to deal with this change - and whatever VAT they have charged has to be paid over. So nothing in it for them.