Is it right that vat is charged on budget plan amount rather than actual usage?

JHB_2

I have realised that my provider is applying the 5% VAT on my monthly budget plan amount rather than my actual usage. I have worked out that over the last 4 months the amount of VAT on usage would be £8.62, whereas I have been charged £16.20. Best of it is I am in credit. Can companies do this as I am rather shocked and not happy and want to know where I stand before I contact them! :j

bryanb

VAT should be charged on the invoice amount.

JHB_2

What is regarded as invoice amount, as it gives the cost of actual usage and the budget plan amount on the invoice.

Belenus

When actual usage versus budget usage is reconciled, won't you get any overpayment, including the VAT element, back.

If your actual usage is well below your budget usage, contact them and ask them to revise the budget usage downward accordingly.

JHB_2

I don't know if I've got this wrong, but it seems to me, if I wasn't in credit I would still be paying more VAT than I should be or am I totally puddled? :-)

Nada666

JHB wrote: »

I don't know if I've got this wrong, but it seems to me, if I wasn't in credit I would still be paying more VAT than I should be or am I totally puddled? :-)

Eh?

Bills are confusing enough as they are without having separate rebillings for VAT.

I'm not sure I understand the problem. VAT is charged on the whole bill, standing charge and usage. A budget plan is just a monthly instalment to your account.

JHB_2

Nada666 wrote: »

Eh?

Bills are confusing enough as they are without having separate rebillings for VAT.

I'm not sure I understand the problem. VAT is charged on the whole bill, standing charge and usage. A budget plan is just a monthly instalment to your account.

To clarify, the bill does show the standing charge cost and the usage cost, but then applies the VAT to the monthly budget plan amount, which is higher than both if that makes sense?

keith1950

No it doesn't make any sense....over a given period everything will reconcile itself.....there will be times of the year when you pay more vat on the payments than the actual usage and vice versa.
You are, I am afraid ,totally puddled !

JHB_2

How rude, but in response, if I am not paying VAT on the usage only, I will always be paying more and if, as the previous poster stated that a Budget Plan is just a monthly instalment, then surely it's wrong!

WestonDave

VAT is payable on the earliest of payment or invoice so in normal circumstances you'd pay the VAT on the instalments until such time as there is a balancing off exercise - e.g. the end of the contract, at which point any overpaid amounts (including any overcharged VAT) will be refunded. Unfortunately VAT legislation wasn't drawn up with these sorts of budget accounts in mind so its having to work around that. As far as I can see what the company are doing is correct within the rules.

JHB_2

WestonDave wrote: »

VAT is payable on the earliest of payment or invoice so in normal circumstances you'd pay the VAT on the instalments until such time as there is a balancing off exercise - e.g. the end of the contract, at which point any overpaid amounts (including any overcharged VAT) will be refunded. Unfortunately VAT legislation wasn't drawn up with these sorts of budget accounts in mind so its having to work around that. As far as I can see what the company are doing is correct within the rules.

Thank you - I appreciate your help