VAT on excess mileage after voluntary termination

broomy23

VWFS are trying to charge me VAT on excess mileage after terminating my PCP. My contract states the Excess Mileage Charge is payable and pro rated if I voluntary terminate. I am happy to pay the Excess Milage Charge, but I do not believe VAT is applicable.

S100(4) of the Consumer Credit Act states, “If the debtor has contravened an obligation to take reasonable care of the goods or land, the amount arrived at under subsection (1) shall be increased by the sum required to recompense the creditor for that contravention, and subsection (2) shall have effect accordingly.”

Therefore, I am lead to believe that the Excess Milage Charge is damage in law as I voluntarily terminated. This would be different if I simply handed back my car at the end of the PCP as voluntary termination is a statutory right, not a contractual right. Furthermore, if I kerbed an alloy, VAT would not be levied so why should VAT be levied on the Excess Milage Charge?

Goudy

Excess mileage is considered a service charge and therefore subject to VAT, not damage.

Some manufacturers/finance companies quote their excess mileage charges including VAT.
Some without VAT but it will be in the small print somewhere stating VAT is applicable.
(you can guess which VWFS uses).

The upshot is, VAT is payable on this charge and it will show on any receipt as business users can claim 100% back for commercial vehicles and between 50 and 100% on cars, depending on usage and contract.

You'll find all this on the .Gov website under Motoring Expenses and VAT.

Arunmor

Surely if VAT was chargeable and assuming this was a consumer contract then the excess mileage figure quoted in the contract should include VAT?

Mildly_Miffed

Arunmor said:

Surely if VAT was chargeable and assuming this was a consumer contract then the excess mileage figure quoted in the contract should include VAT?

...or clearly state that it was subject to VAT at the rate pertaining at the date of termination.

facade

Mildly_Miffed said:

Arunmor said:

Surely if VAT was chargeable and assuming this was a consumer contract then the excess mileage figure quoted in the contract should include VAT?

...or clearly state that it was subject to VAT at the rate pertaining at the date of termination.

Which would be very sensible indeed, given that the rate of VAT is at the whim of the Government, and most certainly won't go down!

Jenni_D

facade said:

Mildly_Miffed said:

Arunmor said:

Surely if VAT was chargeable and assuming this was a consumer contract then the excess mileage figure quoted in the contract should include VAT?

...or clearly state that it was subject to VAT at the rate pertaining at the date of termination.

Which would be very sensible indeed, given that the rate of VAT is at the whim of the Government, and most certainly won't go down!

Oh, but historically it has.  

https://www.vatcalculatoruk.co.uk/vat-rate-chart/

But is unlikely to do so in the immediate future.

Car_54

Mildly_Miffed said:

Arunmor said:

Surely if VAT was chargeable and assuming this was a consumer contract then the excess mileage figure quoted in the contract should include VAT?

...or clearly state that it was subject to VAT at the rate pertaining at the date of termination.

Which it almost certainly does, somewhere in the small print.

Grey_Critic

As a point of interest how much is the VATpart of the excess mileage charge - A Fiver or Five hundred?

Grumpy_chap

broomy23 said:

VWFS are trying to charge me VAT on excess mileage after terminating my PCP. My contract states the Excess Mileage Charge is payable and pro rated if I voluntary terminate. I am happy to pay the Excess Milage Charge, but I do not believe VAT is applicable.

S100(4) of the Consumer Credit Act states, “If the debtor has contravened an obligation to take reasonable care of the goods or land, the amount arrived at under subsection (1) shall be increased by the sum required to recompense the creditor for that contravention, and subsection (2) shall have effect accordingly.”

Therefore, I am lead to believe that the Excess Milage Charge is damage in law as I voluntarily terminated. This would be different if I simply handed back my car at the end of the PCP as voluntary termination is a statutory right, not a contractual right. Furthermore, if I kerbed an alloy, VAT would not be levied so why should VAT be levied on the Excess Milage Charge?

I think, if the excess mileage charge is payable, then the VAT is payable on this service.

What might be open to challenge, and I am not knowledgeable enough, is that the VT is a statutory right to terminate if 50% of the total has been paid.
There have been threads in the past (*) where it has been commented that the statute does not then allow for excess mileage to be paid on top.  It always seems contentious as, if the "damage" was because the car had been wrapped around a lamp post then the idea that this is covered via the VT 50% would be absurd.
Can the contract relating to the excess mileage charge trump statute?

(*) like this one
https://forums.moneysavingexpert.com/discussion/6469806/excess-mileage-enforceable

broomy23

Grumpy_chap said:

broomy23 said:

VWFS are trying to charge me VAT on excess mileage after terminating my PCP. My contract states the Excess Mileage Charge is payable and pro rated if I voluntary terminate. I am happy to pay the Excess Milage Charge, but I do not believe VAT is applicable.

S100(4) of the Consumer Credit Act states, “If the debtor has contravened an obligation to take reasonable care of the goods or land, the amount arrived at under subsection (1) shall be increased by the sum required to recompense the creditor for that contravention, and subsection (2) shall have effect accordingly.”

Therefore, I am lead to believe that the Excess Milage Charge is damage in law as I voluntarily terminated. This would be different if I simply handed back my car at the end of the PCP as voluntary termination is a statutory right, not a contractual right. Furthermore, if I kerbed an alloy, VAT would not be levied so why should VAT be levied on the Excess Milage Charge?

I think, if the excess mileage charge is payable, then the VAT is payable on this service.

What might be open to challenge, and I am not knowledgeable enough, is that the VT is a statutory right to terminate if 50% of the total has been paid.
There have been threads in the past (*) where it has been commented that the statute does not then allow for excess mileage to be paid on top.  It always seems contentious as, if the "damage" was because the car had been wrapped around a lamp post then the idea that this is covered via the VT 50% would be absurd.
Can the contract relating to the excess mileage charge trump statute?

(*) like this one
https://forums.moneysavingexpert.com/discussion/6469806/excess-mileage-enforceable

That was going to be my original argument, but FOS precedent on this with VWFS indicates that such a complaint would almost certainly not go in my favour. There’s no precedent from what I can tell on the VAT point, so I’m going to run with that.

My argument is that in this instance the Excess Mileage Charge is levied due to a failure to take reasonable care of the goods under s100(4) and therefore amounts to damages under statute, this is not a service therefore VAT should not be applied. 

I’m half thinking VWFS may make a goodwill offer to avoid the FOS scrutiny on this point.