VAT 5% or 20% hidden cost.

square-eyes

Energy prices are supposed to be taxed at 5% VAT. However, I have noticed that if you have to pay a termination fee for transferring to another supplier during a contract, this fee will be taxed at 20% VAT. What a nasty surprise!

ic

So? The fee will be advertised at the inclusive VAT price, so makes no odds, its not like you have to pay extra to what you were expecting to.

JasonLVC

OP, you will find the supply of domestic gas/electric is at the reduced rate of VAT, but the termination fee is not a supply of gas/electric, it is a supply of administration services which would be standard rated.

You actually sort of answer your own question in your OP when you started your post "Energy prices are supposed to be taxed at 5% VAT".....yes, energy prices are but not other services such as termination fees as the fee is nothing to do with energy.

As the termiantion fee is clearly shown as £25 including VAT then you are made aware of the exact cost to terminate, so whether VAT is charged at different rates is somewhat academic.

macman

Spark are not profiting a penny from this, HMRC are.