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VAT on O2 termination fees


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Hi, I have tried the search but could not find anything so here is my question:-

 

I have just terminated two phone contracts early, one with Orange and one with O2.

Orange have not charged VAT on the early termination fee but O2 have. I have Googled this and there are so many replies with some, yes it should be charged and some, no it should not be charged.

There does not seem to be a definitive answer, only opinions.:???:

Has this never been challenged before?

 

Thanks for any advice

Edited by greigster
typo
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Simple solution, neither should be applying termination fees.

 

In my opinion they are expected profit and covering the cost of the free or discounted phone that they give as free as an inducement to take the contract and to avoid having to register as a credit provider.

 

Because the termination fee is not a reflection of their costs, I don't believe that they are enforceable.

 

I found that asking the for a fully itemised explanation of the termination charge and a proper invoice for them made them go away.

 

If they were valid then I think that whether VAT should be refunded depends on how long the contract has been running for, probably 3 or 6 months if I remember the regs and if they haven't been changed in the last 30 years ...

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I would agree with what 2Grumpy said - but even sticking to their claimed VAT perspective, I wonder what happens if you move to a non VAT jurisdiction, then request to terminate your contract?

 

It might sound a bit tenuous/unusual, but by using a non EU registered bank/credit card, you normally avoid paying VAT on many services that do not require a physical delivery address (VOIP, Skype, roaming mobile sims etc) - so surely the same would apply here.

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Simple solution, neither should be applying termination fees.

 

Thanks for your reply,

 

Perhaps I did not explain myself very well. The termination of this o2 account was at my request, it was a 24 month deal with a free phone but I asked to terminate after 12 months.

 

I am happy to pay the remaining 12 months rental in lieu of notice but why do they charge VAT on this lieu of notice figure. There must be a definitive VAT rule, so why would Orange not charge the VAT but o2 does?

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You are terminating and breaking the contract, The most they should charge is the amount that the breach costs them. (NOT including all their profits)

 

Reguardless of the legalaties of can they charge you this, they have been told by Ofcom that they need to offer a discount... I think you need to push them a little harder.

 

As advised above, Write to them, asking how this termination fee is made up, and for them to note that the maximum they can charge is their true costs, and you look forward to them showing the true cost of your cancelation.

If in doubt, contact a qualified insured legal professional (or my wife... she knows EVERYTHING)

 

Or send a cheque or postal order payable to Reclaim the Right Ltd.

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I remember Ofcom said they had to offer a discount, and it was never disclosed. However this thread makes for interesting reading.

 

http://www.consumeractiongroup.co.uk/forum/showthread.php?307903-Possible-New-Case-Law-Against-Mobile-Contract-Early-Cancellation-Fees

If in doubt, contact a qualified insured legal professional (or my wife... she knows EVERYTHING)

 

Or send a cheque or postal order payable to Reclaim the Right Ltd.

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Click here if you fancy an email address that shows you mean business! (only £6 and that will really help CAG)

 

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  • 3 weeks later...

On 1st May, I sent an email outlining the advice from the above posts requesting a reduction of my termination fees and here follows the latest correspondence :-

 

REPLY FROM O2

Sent: Wednesday, May 02, 2012 10:48 AM

 

To: mailto:greigster

 

Subject: Your O2 Complaint - 25xxxxx

 

Hello greigster

 

Thanks for your email.

 

For security reasons, please reply to this email with the first and fourth characters from your account password. I’ll be happy to help with your complaint once this has been provided.

 

Kind regards

 

xxxxxxxxxx | Telefónica UK Limited

 

Complaint Review Service

 

T 0845 3300 684

 

NEXT EMAIL FROM O2

 

 

From: CRemail (UK)

 

Sent: Thursday, May 10, 2012 9:48 AM

 

To:greigster

 

Subject: RE: Your O2 Complaint - 254xxxx

 

 

 

Hello Mr greigster

 

Thanks for your reply.

 

I’m sorry we’ve not explained how your early termination fees are worked out. I understand your frustration with this, especially as you feel the charges exceed what you should be paying.

 

Your contract was taken out on 3 May 2011, for 24 months. At this time, you agreed to pay your line rental for the next 24 months.

 

As you’ve ended your contract early, you’ve been charged your £10.50 monthly line rental charge, multiplied by the remaining months of your contract. This is how your early termination fees are worked out.

 

I’ve now changed your account address to the new address you’ve provided.

 

I hope this helps and if there’s anything else please let me know.

 

Kind regards

 

xxxxxxxx | Telefónica UK Limited

 

Complaint Review Service

 

T 0845 3300 684

 

MY REPLY TO O2

 

 

From:greigster

Sent: 11 May 2012 18:10

To: CRemail (UK)

Subject: Re: Your O2 Complaint - 25xxxxx

 

 

 

Hello Mr O2,

 

Thankyou for your reply.

 

I think you may have misunderstood my complaint.

 

I believe that the termination fee charged by yourselves is excessive.

 

Could you kindly let me know how the termination fee is made up taking into account that the maximum you should charge is amount that the breach has cost you. I look forward to you showing the true cost of my early cancelation.

 

Kind regards

 

greigster

 

 

REPLY FROM O2

 

Hello greigster

 

Thanks for your reply.

 

I’m sorry you’re unhappy with the amount we’ve charged you.

 

When taking out the contract, you agreed to pay £10.50 for 24 months. As it was ended early, we asked you to pay for the remaining months that you’d already agreed to pay.

 

As you’re unhappy with this, I’ve refunded £50 back into your bank account to make it up to you. This will take up to 10 working days.

 

Kind regards

 

 

Mr O2 | Telefónica UK Limited

 

Complaint Review Service

 

T 0845 3300 684

 

 

 

Very happy with the result and thanks to the advice from the above Caggers.

 

Could this thread please be marked as resolved

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Well done. They will never admit that they are wrong, but its £50 better in your pocket than in theirs.

If in doubt, contact a qualified insured legal professional (or my wife... she knows EVERYTHING)

 

Or send a cheque or postal order payable to Reclaim the Right Ltd.

to

923 Finchley Road London NW11 7PE

 

 

Click here if you fancy an email address that shows you mean business! (only £6 and that will really help CAG)

 

If you can't donate, please use the Internet Search boxes on the CAG pages - these will generate a small but regular income for the site

 

Please also consider using the

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