Expired

Terminating a contract, Termination Fee and VAT

8
Found 30th Aug 2012
Just a quick question.

I'm looking at terminating a contract early with O2.

I've read in multiple places that the mobile network doesn't have to pay VAT on the remaining months of the contract and therefore should not include the value of VAT in the termination fee as they would be making more money than if you were to stay with them and pay the contract off monthly.

I put this question to two O2 customer service staff on the online chat, the first very quickly agreed with me, but the second very quickly disagreed with me.

The second had an interesting claim that I've never heard before or seen mentioned anywhere else. He says:

"Contract is cancelled by your wish but as per the contract term you'll be in a contract till the contract end date and we liable to pay the taxes to the goverment for that."

Basically saying I have agreed to 24 months of a contract, if I cancel early, they still have to pay VAT on the service that I would have received.

He couldn't back it up with any evidence and I can't find anywhere else that backs up his claim.

Can anyone enlighten me?
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8 Comments
Banned
You pay the remaining line rental minus vat, always has been the case with my contracts via Vodafone anyway.
Original Poster
dbhoy

You pay the remaining line rental minus vat, always has been the case … You pay the remaining line rental minus vat, always has been the case with my contracts via Vodafone anyway.



O2 are insistent you pay the VAT, I did bring up that Vodafone and Orange don't charge the VAT, but he said he couldn't comment on other networks policies.

I'm just really wanting to know if what he was saying is correct, does the network pay VAT on the remaining months of the contract even if you cancel it?
You don't pay VAT with T-Mobile. The reasoning is VAT is charged on the provision of goods, i.e texts and minutes, by paying off the contract early you don't get any texts or minutes so only pay the contract at the agreed price (minus VAT).

O2 might do it differently.

Edited by: "super_leeds_86" 30th Aug 2012
hmrc.gov.uk/vat…htm

VAT is chargeable on services. Ending a contract means no service, so VAT is applicable. They could charge you VAT on an admin fee for ending the contract early, since that would be a service, but not on the remainder of the money due, since that would simply be settling a debt.
Banned
pete1993

O2 are insistent you pay the VAT, I did bring up that Vodafone and Orange … O2 are insistent you pay the VAT, I did bring up that Vodafone and Orange don't charge the VAT, but he said he couldn't comment on other networks policies.I'm just really wanting to know if what he was saying is correct, does the network pay VAT on the remaining months of the contract even if you cancel it?



I would very much doubt that as when you terminate the contract, it is done there and then, and the number is disconnected within hours, so said contract is no longer accumulating vat, my partner recently terminated 2 or 3 months early, and paid only the remaining line rental with no vat, and she is with O2
Edited by: "dbhoy" 30th Aug 2012
I've heard mixed responses on this as well. Having worked in a call centre I can tell you that EVERYONE you speak to will give you a different story. I'd suggest phoning through to sales and immediately asking (or if they ask "why" etc, demaning) to speak to a team leader (sub-manager/floor walker). Explain to them the problem you are having and the reason you've asked to speak to them is because of the different stories you've been told. State on the phonecall that you know all their calls are recorded and kept for at least 6months so what he/she says to you will be put down on record and may be brought up if you have any problems regarding the matter when cancelling early.

It's a bit of a pain but you'll have closure and evidence in case something goes wrong. You have to stick to your guns and be a bit harsh sometimes when dealing with call centres, it's the only way you'll get what you need as they are all trained to hide things from the caller and fob them off at all costs.

Hope this helps.
Original Poster
Thanks for the replies.

That's likely why he couldn't back up his claim, it wasn't true.

JamesClark1991

I've heard mixed responses on this as well. Having worked in a call … I've heard mixed responses on this as well. Having worked in a call centre I can tell you that EVERYONE you speak to will give you a different story. I'd suggest phoning through to sales and immediately asking (or if they ask "why" etc, demaning) to speak to a team leader (sub-manager/floor walker). Explain to them the problem you are having and the reason you've asked to speak to them is because of the different stories you've been told. State on the phonecall that you know all their calls are recorded and kept for at least 6months so what he/she says to you will be put down on record and may be brought up if you have any problems regarding the matter when cancelling early.It's a bit of a pain but you'll have closure and evidence in case something goes wrong. You have to stick to your guns and be a bit harsh sometimes when dealing with call centres, it's the only way you'll get what you need as they are all trained to hide things from the caller and fob them off at all costs.Hope this helps.



Thats very true, what is also true is that some of them dont know the correct answer so they just make it up as they go along.

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