Should an operator charge you VAT on your contract pay off?

Check this issue out from Steve Rowlands (of S60blogger) about Orange (yeah, them again):

Steve writes:

Sick and tired of the lack of customer service from Orange, I decided to cancel my contract with 10 months remaining.

Upon making the phone call to the customer (dis)service disconnections department, I found myself greeted by a rather rude and abrupt representative..

Informing said representative of my intention to cancel my contract, she informed me that the ‘charge’ for doing so would be £200. For the purpose of my sanity, I will leave out the shrapnel from this equation.
“How is this so?” I asked.

“Well, your contract is £20 per month, multiplied by 10 months, equals £200” came the reply.

My contract is £20 per month, but that is INCLUSIVE of VAT. In my understanding, VAT is charged on a service being provided. Since Orange is not actually going to be providing me with a service for those 10 months, why should I have to pay the VAT?

Indeed, do I actually have to pay the VAT? Can I just send them the amount, less the VAT element and be done with it?

Is this another example of l’Orange’s ineptitude of providing excellent customer service? The real kick in the teeth? Vodafone don’t charge VAT on their cancellations, for exactly the reason stated above……

Maybe I’m just barking up the wrong tree. Taxation expert, I am not.

How did they respond Steve? Did they waive the VAT or stick to their guns?

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13 Responses to Should an operator charge you VAT on your contract pay off?

  1. phoneboy August 28, 2008 at 1:08 pm #

    On this side of the pond, you don't buy out your contract, you pay an Early Termination Fee, which is either a flat fee (around $200) or a sliding fee depending on the carrier and when you want to “opt out” of your contract. Seems much more civilized. And, as far as I know, it's not taxed.

  2. SteveRowlands August 28, 2008 at 1:15 pm #

    Well….. I was kind of hoping that one of your readership may have already had this battle with l'Orange already.

    I am by now way a VAT expert, hence I was just posing the question.

    My 'final bill' has not yet arrived in the post, but am expecting it any day now.

    A friend of a friend is an accountant, so I may well ask them for their opinion.

    I'm minded to just send a cheque, minus the VAT to Orange, along with a letter explaining that, and see how they react……..

    When I challenged the young lady on the phone about it, she just told me that I would need to contact the Orange Legal Team…… she didn't know their phone number…. typical.

    I suspect she was just trying to intimidate me by mentioning the word 'legal'….. kinda backfired on her though, when I asked to speak to them, and she didn't know their contact details.

  3. Burak August 28, 2008 at 4:56 pm #

    I'm not an expert either, but I have had some minor dealings with VAT before. The general rule of thumb is that if you are handing over money to a company in the UK, you've got to pay VAT. There are only a few obscure exceptions that I know of and they don't apply here. It's Gordon Brown's lot that are to blame, Orange don't really have much say in the matter. A couple of suggestions:

    a) you could try paying minus the vat and see what happens. The worst they can do is insist you pay the VAT so in the end you won't end up any worse off.

    b) is there a cheaper tariff you can down-grade to before canceling the contract?

    c) why not keep the contract running until the end of the contract? You're better off paying

  4. smstextnews August 28, 2008 at 5:00 pm #

    approve

    2008/8/28 Disqus <>

  5. nacho August 28, 2008 at 6:20 pm #

    Good but how you transfer ownership of the contract? Tried with O2 but gave up because it was a pain in the butt. For the record, I hate o2!

  6. Barry-Jon August 29, 2008 at 6:22 am #

    Orange didn't charge me VAT when I cancelled my contract early – that was about three years ago now though.

  7. Jonathan September 1, 2008 at 4:31 am #

    Hi there,

    I work for Orange and have checked this for you, and you should not be paying VAT on your final figure.

    If you want to drop me an email with your contact details I will give you a call. Send the email to 'customer.services@orange.co.uk' with the subject 'Jonathon Orange Response' and your details should be passed to me.

    Thanks,

    Jonathon

    Orange Response

  8. smstextnews September 1, 2008 at 7:11 am #

    Thanks for that Jonathan

    2008/9/1 Disqus <>

  9. SteveRowlands September 1, 2008 at 9:16 am #

    Thanks Jonathon.

    I am still waiting for my final bill, which has still not arrived in the post, but I will be sure to send you an email if it arrives with VAT included. I'm presuming it will do, as that is the information I was told over the phone.

    Thanks

    Steve

  10. SteveRowlands September 1, 2008 at 10:16 am #

    Thanks Jonathon.

    I am still waiting for my final bill, which has still not arrived in the post, but I will be sure to send you an email if it arrives with VAT included. I'm presuming it will do, as that is the information I was told over the phone.

    Thanks

    Steve

  11. Dual Sim Phones September 7, 2009 at 7:48 am #

    great post

  12. Dan October 17, 2009 at 1:49 pm #

    can you not cancel the contract of your bacnk account if you go to your branch???

  13. Dan October 17, 2009 at 7:49 pm #

    can you not cancel the contract of your bacnk account if you go to your branch???

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