 Mobile Cashback Deal Failures - Explanation?
Whilst not excusing those firms from reneging on 'cashback' schemes, the following may put some of the blame on to TM Revenue & Customs, in particular, the way VAT is organised.
A well known and respected mobile dealership in the South West of England, promoted deals using cashback. A VAT inspection at the company last year objected to the way the firm was accounting for VAT on the refund, as it was making the refunds inclusive of VAT (reclaiming the VAT element from each payment refunded to the customer). This was quite reasonably seen as a type of self-supply, and as they were paying their contribution as a marketing exercise for customers, they reclaimed the VAT. The VAT people objected to this, and in a ruling that affects JAG's cashback business going back to 2002, C&E are demanding repayment of incorrectly claimed VAT amounting to £360,000.
There was no intent to defraud, simply the classification of cashback as a 'benefit in kind' in which the VAT element is unrecoverable. For those firms who worked out their possible liability and factored in a VAT rebate, would find immediately that their financial planning awry and the scheme made immediately unsustainable... which may explain why so many outlets have disappeared, knowing that only liquidation would resolve the matter - and leaving many hoping for their cashback stranded.
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- Raymond | 
