Impact of VAT cut on fixed deals?

[Deleted User]

Yawn said:

I followed MSE's advice and took out a fix early August, which seems to have paid off so far, but I'm curious to see what will happen if the suggested cuts in VAT and green levies go ahead. Does anyone know if energy companies are required to pass these on? I know a fix is a fix, but it would still seem unfair if a company keeps the difference. (No exit fee so I can still abandon the fix if need be.)

So "a fix is a fix", but it should come down if a levy is removed?  If there was suddenly a new levy required, I assume you would be asking for your fix to go up to cover it?

pochase

No idea about the levy, but my invoice clearly shows the net costs, and VAT is added only in the last step, so clearly the VAT can not be billed.

If the standing charge would suddenly be increased, for example to cover the Bulb cost, I would expect that I don't have to pay for it during the fix, so I am unsure the levy.

spot1034

[Deleted User] said:

Yawn said:

I followed MSE's advice and took out a fix early August, which seems to have paid off so far, but I'm curious to see what will happen if the suggested cuts in VAT and green levies go ahead. Does anyone know if energy companies are required to pass these on? I know a fix is a fix, but it would still seem unfair if a company keeps the difference. (No exit fee so I can still abandon the fix if need be.)

So "a fix is a fix", but it should come down if a levy is removed?  If there was suddenly a new levy required, I assume you would be asking for your fix to go up to cover it?

As I suggested in my reply earlier, if a supplier continued to charge to take account of a levy which they were no longer required to hand over but just keeping as a windfall profit when the levy had been removed specifically so that consumers would benefit from not being charged it, I don't think that would be seen as acceptable. A change in the amount of the levy (up or down) is what would be expected during the life of a fixed tariff, and that is part of the risk taken by both supplier and customer when they agree such a deal. The complete removal of a levy which was never expected to happen, and for the reason that the customer should no longer have to pay it, is a wholly exceptional situation. And I'd suggest that if any one supplier announced that they were rebating the levy to fixed tariff customers (which they could do at no unexpected cost to themselves if they were no longer required to pass it on) the rest would quickly follow.

Anyway we'll see what happens if and when the situation arises.

[Deleted User]

spot1034 said:

[Deleted User] said:

Yawn said:

I followed MSE's advice and took out a fix early August, which seems to have paid off so far, but I'm curious to see what will happen if the suggested cuts in VAT and green levies go ahead. Does anyone know if energy companies are required to pass these on? I know a fix is a fix, but it would still seem unfair if a company keeps the difference. (No exit fee so I can still abandon the fix if need be.)

So "a fix is a fix", but it should come down if a levy is removed?  If there was suddenly a new levy required, I assume you would be asking for your fix to go up to cover it?

As I suggested in my reply earlier, if a supplier continued to charge to take account of a levy which they were no longer required to hand over but just keeping as a windfall profit when the levy had been removed specifically so that consumers would benefit from not being charged it, I don't think that would be seen as acceptable. A change in the amount of the levy (up or down) is what would be expected during the life of a fixed tariff, and that is part of the risk taken by both supplier and customer when they agree such a deal. The complete removal of a levy which was never expected to happen, and for the reason that the customer should no longer have to pay it, is a wholly exceptional situation. And I'd suggest that if any one supplier announced that they were rebating the levy to fixed tariff customers (which they could do at no unexpected cost to themselves if they were no longer required to pass it on) the rest would quickly follow.

Anyway we'll see what happens if and when the situation arises.

I'd agree with you, I think they should (and probably will) - particularly as that would be the intention of the government in making the change.  But it would be interesting to see how people would argue if the change was in the other direction.

Yawn

[Deleted User] said:

spot1034 said:

[Deleted User] said:

Yawn said:

I followed MSE's advice and took out a fix early August, which seems to have paid off so far, but I'm curious to see what will happen if the suggested cuts in VAT and green levies go ahead. Does anyone know if energy companies are required to pass these on? I know a fix is a fix, but it would still seem unfair if a company keeps the difference. (No exit fee so I can still abandon the fix if need be.)

So "a fix is a fix", but it should come down if a levy is removed?  If there was suddenly a new levy required, I assume you would be asking for your fix to go up to cover it?

As I suggested in my reply earlier, if a supplier continued to charge to take account of a levy which they were no longer required to hand over but just keeping as a windfall profit when the levy had been removed specifically so that consumers would benefit from not being charged it, I don't think that would be seen as acceptable. A change in the amount of the levy (up or down) is what would be expected during the life of a fixed tariff, and that is part of the risk taken by both supplier and customer when they agree such a deal. The complete removal of a levy which was never expected to happen, and for the reason that the customer should no longer have to pay it, is a wholly exceptional situation. And I'd suggest that if any one supplier announced that they were rebating the levy to fixed tariff customers (which they could do at no unexpected cost to themselves if they were no longer required to pass it on) the rest would quickly follow.

Anyway we'll see what happens if and when the situation arises.

I'd agree with you, I think they should (and probably will) - particularly as that would be the intention of the government in making the change.  But it would be interesting to see how people would argue if the change was in the other direction.

This is all very helpful. Glad I wasn't the only one thinking about this and glad nobody seems to be thinking that those who fixed would lose out.

I don't know about levies, but I imagine if VAT increased then that would just be passed on. Presumably there would be something in the T&Cs about this. Broadband and mobile phone companies allow themselves to increase prices with inflation every year... 

jrawle

When you take out a fixed deal, the fixed price is actually the ex-VAT price. VAT is then charged at whatever the current rate is, so any decrease or increase would affect everyone.

It's not at all clear what cutting "green levies" really means. These are not paid by the end consumer, but by the energy companies, and are passed on to customers as part of the total bill, mixed up with wholesale costs, distribution., etc. They are not separately itemised. But as scant details are available as to what this proposal actually means, we can only speculate how it would affect people on different types of tariff.

Mstty

Being on a fix for two year til April 2024 I would only expect to benefit from the 5% vat and not the green levy rebate.

macman

If VAT is reduced, then that will be reflected in all subsequent bills where the tax point is on or beyond the date at which the cut came into force. Whether the tariff is variable, capped or fixed makes absolutely no difference.