VAT when cancelling holiday....

undercovermoney

Hi guys
Due to unfortunate circumstances we are having to cancel our family Centerparcs trip on July 22nd - I paid the insurance but it doesn't cover our circumstances, and have appealed to them to let us move our dates even if it incurs a fee but I just get the terms and conditions thrown back at me - tough luck, less than 10 weeks notice, they will keep 75% of my £830. Nice.

So, very upset about that as you can imagine, but what confuses me is that within the £830 was a fair amount of VAT. Surely, if I am not going to have a holiday out of them, they are not able to keep the VAT element of the invoice? Also, if they call the £620 they are keeping as a Cancellation charge it shouldn't, as far as I can tell, be subject to VAT - so in theory if the (non-VAT) charge of £620 is represented as a percentage of the net-VAT total they are actually charging me 90%.

It infuriates me that as a loyal customer they are being so unflexible - but also that they get my £620 for supplying nothing and will sell the break to someone else too.

I called the VAT line and they were not too sure, they suggested trading standards who will get back to me in 4 days. I want to cancel very soon as the penalty will soon be 100% of my payment. I really would like to know where I stand with the VAT element - at least I might stand a chance of getting another £100+ out of the mercenary so and so's. If they are keeping the VAT element from people who cancel but then not liable to forward that to the taxman, surely that could be construed as VAT fraud?

Any advice gratefully received

Regards

Mike

00ec25

you should concentrate on submitting the cancellation if time is running out not get vexed over VAT. It is your choice to cancel, they have T+C that state the consequences of so doing. They may or may not resell the slot, that is none of your concern, you cancelled so have to take the consequences of your own action, it is not their fault that you want to cancel and they are therefore entitled to compensation for you not turning up

as for VAT, it depends...
7.2 Cancellation charges
Normally, if you make a cancellation charge to a guest who cancels a booking, VAT is not due, because it is compensation. This includes amounts debited from credit cards using details provided at the time of the booking. Where the cancellation charge takes the form of a retained deposit, you can reclaim any VAT already accounted for as an adjustment to your next return.

But this does not apply to guaranteed rooms which you are obliged to hold for a customer for an agreed period. Any fee charged where the room remains available to the customer is consideration for a supply and is subject to VAT.

Where you arrange or provide any guarantee or insurance against your guest having to pay cancellation charges, the charge you make for this may be exempt, if you hold a “block insurance policy“. You should consult Notice 701/36, Insurance, paragraph 2.5, Insurance transactions effected by holders of block policies.

Any commission you receive from a person permitted to carry on an insurance business under Section 2 of the Insurance Companies Act 1982 is exempt.

undercovermoney

Thanks for the reply 00ec25

Please don't get the wrong impression - I'm totally aware that it is my 'choice' to cancel the break, and that I have to face the consequences, but I would like to know where I stand re the tax.

I have another week to actually make the cancellation - the truth is that our beloved family pet will have to be euthanised in the coming weeks. Our family is obviously distraught about this, we have 2 young kids that have been looking forward to their holiday, losing 75% of our payment plus impending vet bills means that the family holiday is likely off this year. I'm faced with the situation that I can only go away if nature takes its course sooner rather than later - doing it sooner just so we can go on holiday is simply not happening - so you can see my 'choice' isn't as simple as feeling like changing the dates- but I am aware it is not Centerparc's 'fault'.

So, that's enough of the off topic ( i.e. the reason behind the cancellation!).

I'd still like to know for sure (as even the VAT office were not sure) if I paid the full amount inc. VAT, and then cancel, can they simply keep the VAT? From what I read on your reply, if they have already paid the VAT onto the taxman they can offset it against their next payment which suggests to me that they are effectively keeping the VAT I paid. If that's the way it works, then fair enough there's nothing I can do - but it just seems strange to me and would like to know for sure.

Many thanks

Mike

le_loup

undercovermoney wrote: »

if they have already paid the VAT onto the taxman they can offset it against their next payment which suggests to me that they are effectively keeping the VAT I paid.

No they can only offset it if they issue you a credit note which is entirely the opposite of what they are doing.
I'm afraid you will lose the VAT as well as the cost and the company will have to pay the VAT man 20% of your money.

Buzby

Agreed. Unless you are actually a 'Registered Taxable (VAT) person or entity, there is no possibility of any rebate.

Even if the cost charged is 75% of the total price due VAT remains due on any amount charged. Unlike like Air Passenger Duty, however the airlines build in fees that are such claims pointless.

undercovermoney

le_loup wrote: »

No they can only offset it if they issue you a credit note which is entirely the opposite of what they are doing.
I'm afraid you will lose the VAT as well as the cost and the company will have to pay the VAT man 20% of your money.

Thanks for the reply le loup.

Hmmm. So the money I paid for the break is subject to VAT due to the taxman - if/when Centerparcs sell the break to someone else, I assume the VAT on that is due to the taxman too.

Im that scenario, the taxman is getting VAT on both a service provided AND a service 'not provided' if that makes sense. The VAT paragraph quoted above suggested to me that Centerparcs can actually offset the cancellation i.e. it was paid, but subsequently cancelled, so could be offset against their next return. I wouldn't be surprised that the taxman would take both, but I didn't get the impression that is what is happening in reality - it looks to me that CP will only pay the VAT on a service provided IF they resell the break - i.e. they effectively 'keep' the VAT I paid.

Looks like this is just something I need to live with - but it seems a like 'someone' ( except me!) is ending up with the tax on a service that never actually happened - at this point I'd much rather it be the revenue than Centerparcs!;)

Cheers

Mike

JasonLVC

Interesting thread.

In theory, VAT can only apply where there is a consideration (money) and a supply of either goods or services.

So where money has been paid and a service is not supplied, there is an argument that the money paid cannot be subject to VAT.

00ec25's earlier post alludes to the guidance on this, mostly concerning hotel rooms and cancellations/no shows. HMRC's guidance states that if the room is paid for and then you don't turn up then this is compensation (not VATable) where the room is unallcoated, but where the guest has specfically reserved a particular room (ie, the honeymoon suite) then the payment is still VATable.

See here:-
http://www.hmrc.gov.uk/manuals/vatscmanual/VATSC42300.htm

So you may have opted for a certain type of accommodation (ie, 2 bed, 4 bed, etc) and a certain grade (basic, deluxe, etc) but that in itself isn't a guaranteed reservation no more than it is if you order a twin or a double bed in a hotel.

So if you haven't reserved a specific lodge number or specific location near the swimming pool/car park then there's an argument Centerparcs should return the VAT element to you as they've not supplied you with anything to attach VAT to.

But if you have reserved a specific lodge (disabed, near the shops, etc) and paid extra for this "guarantee" of choice then the VAT is still applicable as the VAt attaches to the service of reserving a specific lodge for you.

It's worth an email and a copy of the above link to be pinged off to Centerparcs and see what they have to say about it.

undercovermoney

Hi JasonLVC

It's all gone a bit quiet from their accounts department at the moment - I'm waiting on the answer to the question on a) whether I will get an invoice for the retained 75% and b) whether or not it is subject to VAT. I'm surprised that this isn't something they have an immediate answer to given that they must give refunds - partial or otherwise - all the time.

We ordered a type/grade of lodge but nothing different from the standard options e.g. we wouldn't know which lodge until we turned up and it wasn't guaranteed to be near the village centre or anything like that. The only options I ticked were the charity donation, and the insurance - which didn't cover me. As soon as I cancel, effectively they won't be 'reserving' anything for me.

Let's see what they come back with (they promised today but nothing so far).

Cheers

Mike