VAT on Utility Penalty Payment

Dellaf

I have jumped too early from one utility company to another and have incurred a penalty payment for leaving early. I accept that. However can they then charge VAT on that payment? £60 is now £72! Is this a common practice?  The company is Utility Point and I jumped because they had bad reviews for not paying out at end of contract at the time. 

molerat

Yes.  Exit penalties are not energy consumption so are subject to 20% VAT.

greyteam1959

Yes it's in the small print that nobody ever reads.

WhoIsThat

Dellaf said:

I have jumped too early from one utility company to another and have incurred a penalty payment for leaving early. I accept that. However can they then charge VAT on that payment? £60 is now £72! Is this a common practice?  The company is Utility Point and I jumped because they had bad reviews for not paying out at end of contract at the time. 

Suppliers should quote the exit fees inclusive of VAT, Comparison sites always quote the exit fees inclusive of VAT.

What does your contract say are the exit fees?

Utility Point usually charge £36 per fuel exit fees (where applicable), which includes VAT.
But check your own contract. Which UP tariff were you on?

MWT

Yes the VAT should be 20%, but ... as this is a retail contract aimed at consumers, all prices should be shown inclusive of VAT.

They advertise the penalty in multiple places without reference to the fact that it excludes VAT, only actually mentioning it if you dig into the fine details.

I'd say it was worth a complaint to the regulator anyway as it is intentionally misleading...

bristolleedsfan

WhoIsThat said:

Dellaf said:

I have jumped too early from one utility company to another and have incurred a penalty payment for leaving early. I accept that. However can they then charge VAT on that payment? £60 is now £72! Is this a common practice?  The company is Utility Point and I jumped because they had bad reviews for not paying out at end of contract at the time. 

Suppliers always quote the exit fees inclusive of VAT, Comparison sites always quote the exit fees inclusive of VAT.

What does your contract say are the exit fees?

Utility Point usually charge £30 per fuel exit fees (where applicable), which includes VAT.
But check your own contract. Which UP tariff were you on?

U.P quote exit penalties on statement exclusive of VAT thus £30 exit penalty is Plus VAT, this is what it says on every monthly statement

"All charges and estimated costs include VAT (except exit fees). This may be different to the way they are shown on your statements. If you're on a variable rate plan, your unit rates and standing charges may go up or down in the future. Your assumed annual consumption is based on estimated usage over a 12 month period."

Dellaf

It  looks like the small print has caught me. I find the lack of transparency in the headline misleading though. I'll be wiser next time. Thanks all. 

MWT

Dellaf said:

It  looks like the small print has caught me. I find the lack of transparency in the headline misleading though. I'll be wiser next time. Thanks all. 

At least take a few minutes and sent a complaint in to the ASA as their current advertising is intentionally misleading.

bristolleedsfan

About your Package Membership number: ....

Statement number: 2088487

Statement date: 20/05/2020

About your gas package MPRN ,,,,,

Package name Just Up 19 Wk11

Direct Payment method Direct Debit Package ends on 19/09/2020 Exit fees(if you cancel before the end date) £30.00

Assumed annual consumption 1302

Do you know how much energy you use each month? For this bill period you have used Compared to the same period last year Electricity 0 kWh N/A Gas 95 kWh N/A

All charges and estimated costs include VAT (except exit fees). This may be different to the way they are shown on your statements. If you're on a variable rate plan, your unit rates and standing charges may go up or down in the future. Your assumed annual consumption is based on estimated usage over a 12 month period.

( Above all on same statement page)

British Gas and probably others seemingly  state exit fees exclusive of VAT as well

https://www.britishgas.co.uk/energy/gas-and-electricity.html

WhoIsThat

bristolleedsfan said:

WhoIsThat said:

Dellaf said:

I have jumped too early from one utility company to another and have incurred a penalty payment for leaving early. I accept that. However can they then charge VAT on that payment? £60 is now £72! Is this a common practice?  The company is Utility Point and I jumped because they had bad reviews for not paying out at end of contract at the time. 

Suppliers always quote the exit fees inclusive of VAT, Comparison sites always quote the exit fees inclusive of VAT.

What does your contract say are the exit fees?

Utility Point usually charge £30 per fuel exit fees (where applicable), which includes VAT.
But check your own contract. Which UP tariff were you on?

U.P quote exit penalties on statement exclusive of VAT thus £30 exit penalty is Plus VAT, this is what it says on every monthly statement

"All charges and estimated costs include VAT (except exit fees). This may be different to the way they are shown on your statements. If you're on a variable rate plan, your unit rates and standing charges may go up or down in the future. Your assumed annual consumption is based on estimated usage over a 12 month period."

Prices on statements are usually exclusive of VAT, and then VAT is added at the end.
Nice that UP specifically state the price is exclusive of VAT.
Not sure why the OP is questioning if VAT should be applied. If the supplier is VAT registered, they have to apply the VAT at the applicable rate.

WhoIsThat

Dellaf said:

It  looks like the small print has caught me. I find the lack of transparency in the headline misleading though. I'll be wiser next time. Thanks all. 

The print is not small - it's the same size as all the rest.