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VAT Changes

VAT Changes

VAT Changes

VAT cut to 15% You can't have missed today's news that Chancellor Alistair Darling has cut the rate of VAT to 15%.  Great news for all of us I'm sure you'll agree as we're all now counting our pennies. The VAT change takes effect from 1st December 2008 and will last until the end of 2009. We're pleased to confirm that we will pass on the benefit of this reduction to all of our customers, including our broadband subscription and phone packages.  Existing customers' subscription charges will also be charged with the new VAT rate. Our official statement is as follows: 'The chancellor has announced that the VAT rate will be reduced to 15% from 1st December 2008 until the end of 2009. Plusnet will pass on the benefit of this reduction to all our customers from 1st December including subscription contracts signed from today. It is Plusnet's intention that all customers will benefit from the change to VAT, even where those customers have been billed or paid in advance for services to be consumed from 1st of December, and we will be adjusting customers' bills as appropriate.' We'll keep you informed with updates here on the Community Site as soon as we have them.

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15 Comments
Community Veteran
Thank you for being pro active in this. I am sure a lot of companies will just accept the increased nett profit. Pity you will have to announce price increases at the end of 2009 though.
Not applicable
In theory it won't cost Plusnet any money but in practice it will as accounting will have to be changed. Quick calculation - means it's going to reduce my broadband/phone package from £24.98/month to £24.45/month so will save me £6.89 over the period.
Grafter
I don't believe that it will cost PN any money on the accountancy front. Where it could cost them money is on the referrals payments if they keep them at the same level as these carry a 17.5% VAT discount. So will PN reduce the referrals payments?
Not applicable
@Itsme - We're just seeking confirmation on how we'll be handling referrals. More on this soon.
Not applicable
Will this reduction be passed on to Madasafish, Waitrose & Greenbee customers as well?
Not applicable
Re above: I am logged in 'cos it says so!!!!!
Grafter
In most cases a 2.5% reduction will leave payments being a fraction of a penny. In my case : NOW 17.5% = £21.99p NEW 15% = £21.522127p AND : NOW 17.5% = £4.99p NEW 15% = £4.883829p Will these fractions be rounded up or down? Sorry for seeming pedantic and in all cases it would only be 1p, but I like to be clear on these things.
Grafter
Good move PN nice to see some one thinking of the customer first.I heard a lady shop owner say on the news that she could not pass on the reduction ,surely as retailers collect this tax for the goverment they must reduce the prices by the amount the tax is reduced ,dont make sense to me.
Not applicable
@A.E.Simpson They will simply raise the ex-vat price by the 2.5% deduction they are taking away from the new VAT figure. So, you will still pay the same as the total amount after VAT has not changed.
Not applicable
**'It is Plusnet’s intention that all customers will benefit from the change to VAT, even where those customers have been billed or paid in advance for services to be consumed from 1st of December, and we will be adjusting customers’ bills as appropriate.’** This reads to me as if PN are planning to refund VAT already paid by their customers. Since VAT is charged at the prevailing rate at time of invoicing, any customer who has already paid an invoice, has already paid the correct rate, regardless of when the services are to be consumed. HMRC will still expect PN to pass on VAT at the rate of 17.5% on all invoices raised prior to the 1st December. So, my question is; Where is the money coming from for all these *refunds*? Or Is it just smoke and mirrors, and sooner or later PN will confess that no refund is due to anybody for these very reasons?
Not applicable
As I've said elsewhere the people making "official" statements have never been registered for VAT or had the pleasure of a VAT inspection. Nobody will be entitled to a refund except where there's been an error in an invoice which means customer has been overcharged. If I'm invoiced on 18th Dec 2008 I'll have paid 17.5% up to 17th Dec. When I'm invoiced on 18th Dec 2009 I'll pay 15% up to 17th Jan 2010 albeit rate has gone up on 1st Jan. I've therefore got my 13 month reduction. QED
Not applicable
Proof that you can please most of the people most of the time... Although it would seem that some people walk around town with magnets on their shoes in the hope of picking up pennies. ** Well done Plus Net for actually REDUCING the VAT :-) ** FYI, to convert from the current 17.5% rate to the new 15.0% rate is : new_price = 115 * ( price_now / 117.5 ) or a saving of £2.12 for every £100 at the 17.5% rate.
Not applicable
Not sure how this applies here, but at work today we were advised that for periods of rent crossing that changeover, we can apportion the rent for the period to 30th Nov and then from 1st Dec accordingly (even if billed in September).
Seasoned Pro
When VAT rates are changed, it is usual for the government to also introduce special transitional arrangements.
Not applicable
Actually VAT rates haven't changed many times over the years. Ignoring domestic fuel it last changed in 1991 when it went from 15% to 17.5%