Three mobile. VAT and Early Termination Fee.

JasonLVC

Buzby wrote: »

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.

Sorry but you need to read my earlier posts and the HMRC link, VAT can only apply where you have a consideration (payment) AND a supply.

There's plenty of case law on this, if you book a hotel and pay in advance and then fail to turn up, hotels don't have to charge VAT becuase there was no supply of the room, the amount you paid when booking (and lost for not turning up) becomes an amount not subject to VAT at all.
http://www.hmrc.gov.uk/manuals/vatscmanual/vatsc42400.htm

Three have got it wrong but at least HMRC gains unless Three are charging VAT but keeping it. As long as invoice shows VAT then one can be reassured it is getting paid over to HMRC, but doesn't make it right.

tokaten

This was my point. Three are charging VAT but not showing it on the bill separately. i.e 6 x 12.50 (months remaining) = £75. The ETF is billed as £75 with 0% VAT next to it. So they are keeping it!

grumbler

If they don't show it separately, then they don't charge it.
The question is then whether there are any regulations limiting the ETC that they can charge. I.e. if the total amount for the remaining months is, say, £100+£20VAT, can they not just charge £120 (no VAT)?

Buzby

Yes, I did read it and you are missing my point.

The supply is the minimum term for which the period-based charge is levied. It cannot be summarily be changed as this is a service contract. The supply element is confirmed over the bundle cost, the only unknown element is additional VAT levied for out of bundle calls, but since these will not occur, are not a consideration.

Your hotel analogy is nonsensical in this context as this is event based not period based, and your conclusions therefore flawed. As for Three 'keeping' the VAT - you've proved this, how?

As to 'not showing VAT separately'. They have no reason to, unless - as a taxable person/entity - you ask them to provide a VAT invoice. If you have a business contract, all your costs will be shown as VAT exclusive with the 20% addition at the end. Consumer accounts are shown inclusive so there is no VAT to show (as it is included in the shown amount).

By all means be aggrieved - nobody likes paying tax - but If you feel you are due a rebate, take it up with R&C, but I know the answer.

tokaten

grumbler wrote: »

If they don't show it separately, then they don't charge it.

My bill says;
Early Termination Fee £75.00
Total charges before VAT £75.00
VAT at 0.0% on £75 £00.00

This is exactly what I owe including VAT. Three are saying it's a printing error and that it does include VAT, and to ignore the above. I was arguing that I wanted 20% back but they are saying I owe them £75 inc VAT.

tokaten

'Consumer accounts are shown inclusive so there is no VAT to show (as it is included in the shown amount). '

This is wrong Buzby. There's VAT breakdowns all over my previous Three bills..

JasonLVC

Buzby wrote: »

Yes, I did read it and you are missing my point.

The supply is the minimum term for which the period-based charge is levied. It cannot be summarily be changed as this is a service contract. The supply element is confirmed over the bundle cost, the only unknown element is additional VAT levied for out of bundle calls, but since these will not occur, are not a consideration.

You're missing the point becuase if you read the law and HMRC guidance (see link) it CLEARLY states VAT cannot be charged on compensation or where no service has taken place. Becuase you are coming from the point VAT must be charged at all costs then what point is there trying to convince you otherwise if your mind is made up and links to the actual law ignored?

Buzby wrote: »

Your hotel analogy is nonsensical in this context as this is event based not period based, and your conclusions therefore flawed. As for Three 'keeping' the VAT - you've proved this, how?

The hotel analogy is not flawed, it is the foundation of EU VAT case law on contract termination - its nothing to do with 'events' based activities, it is all to do with what a termination fee can be for VAT purposes. You'd know this if you were a tax lawyer;)

As for Three keeping it, I did not say they had so don't need to 'prove' it. Read my post again without the emotional need to respond in the negative. I said it would be an issue if they charged it and kept it but provided it is shown on invoice then we have to trust them. How you can read that as me accusing them of fraud is quite a large leap.

Buzby wrote: »

As to 'not showing VAT separately'. They have no reason to, unless - as a taxable person/entity - you ask them to provide a VAT invoice. If you have a business contract, all your costs will be shown as VAT exclusive with the 20% addition at the end. Consumer accounts are shown inclusive so there is no VAT to show (as it is included in the shown amount).

Odd, looking at my old Three invoices, Tmobile and my current O2 invoices, all show VAT as a seperate charge (these are personal contracts). Sure, they have printed on them "this is not a VAT invoice" but that is for tax point purposes, the VAT is still shown seperate on the bills I just cannot reclaim the VAT as they are not valid VAT invoices (by virtue of them stating they are not VAT invoices). So do my gas, electric, broadband, telephone, etc despite me being a retail customer with no right to reclaim input tax.

True, retailers can issue a simplified receipt/invoice and must produce one on demand but that is not what happens with Three. Indeed, Three provide an example invoice to explain the layout to customers and quite clearly shows VAT as a seperate charge :-

http://support.three.co.uk/SRVS/CGI-BIN/WEBISAPI.DLL?Command=New,Kb=Mobile,Ts=Mobile,T=onlinePortlet,varset_cat=billing,varset_subcat=3767,Case=obj(4180)



So why would all their monthly invoices show VAT seperate but the ETF - which you are suggesting is merely a continution of a contract and therefore taxable, suddenly not show VAT on it?

Buzby wrote: »

By all means be aggrieved - nobody likes paying tax - but If you feel you are due a rebate, take it up with R&C, but I know the answer.

The real question here is to ask why all the other mobile operators, broadband providers, car leasing companies and hotels do not charge VAT on their early termination fees,so wonder if this is either a simple error or the OP has mis-undersood the invoice details.

grumbler

tokaten wrote: »

My bill says;
Early Termination Fee £75.00
Total charges before VAT £75.00
VAT at 0.0% on £75 £00.00

This is exactly what I owe including VAT. Three are saying it's a printing error and that it does include VAT, and to ignore the above. I was arguing that I wanted 20% back but they are saying I owe them £75 inc VAT.

Ignoring the rubbish about 'printing error', this means that the ETC they charge is £75, VAT exempt. As I said above, the question is whether there are any regulations stopping them from charging that big ETC (as compared to the total charges for the remaining months, i.e. £62.50+£12.50VAT)

JasonLVC

tokaten wrote: »

My bill says;
Early Termination Fee £75.00
Total charges before VAT £75.00
VAT at 0.0% on £75 £00.00

This is exactly what I owe including VAT. Three are saying it's a printing error and that it does include VAT, and to ignore the above. I was arguing that I wanted 20% back but they are saying I owe them £75 inc VAT.

The VAT cannot be 0% (although accept many billing systems will substitute 0%/zero rate for outside the scope), so it appears Three are stating the ETF is either zero rated or not subject to VAT - so VAT isn't being charged.

They now say that VAT isbeing charged but the figure is sstill £75 but that is wrong anyway as they are supposed to give you a 3% discount (as per contract conditions) so it should at least be £2.25 less than stated.

The very fact this invoice now has two errors on it - the VAT/no VAT issue and a missing discount does not instil any confidence in paying it, although I suspect this discussion is now merely academic in nature, but interesting nonetheless.

JasonLVC

grumbler wrote: »

Ignoring the rubbish about 'printing error', this means that the ETC they charge is £75, VAT exempt. As I said above, the question is whether there are any regulations stopping them from charging that big ETC (as compared to the total charges for the remaining months, i.e. £62.50+£12.50VAT)

If the VAT rate changed, the supplier would simply pass these changes onto the consumer with some waffle about VAT isn't going to the supplier, but passed onto HMRC. Three were keen to make it clear the VAT increase does not affect the contract/permit cancellation
http://ask3.three.co.uk/srvs/cgi-bin/webisapi.dll/,/?new,kb=mobile,ts=mobile,t=casedoc.tem.tem,case=obj(2591),varset_username=Mobile:mobileUser

Having looked at the T&C's and Pricing Guides earlier, it doesn't mention VAT much beyond noting prices are including VAT (except for business customers which had a seperate section in the pricing guide).

As the contract states the ETF is based on the remaining months in the contract, one can only conclude the ETF is a matter of months left x monthly fee. It is possible to assume that the monthly fee includes the VAT but then back to the question posed about what is stopping them from including VAT? Well, the VAT law prohibit charging VAT on a supply that never took place, but it would turn on whether Three argue the ETF is an "admin charge" based on length remaining which would then make it a service and VATable or whether it really is just a fee for the remaining months left. The T&C's simply state the eTF is based on remaining months but is mute on what the ETF actually represents.

Its certainly odd for Three to be different to every other mobile provider ETF's and there's no benefit in it for them charging VAT when they don't have to, somethig is certainly wrong somewhere be t the invoice, the OP interpretation, the Three handlers advice, etc.