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What difference will VAT reduction make to broadband prices?
Monday 24 November 2008 21:38:54 by Andrew Ferguson

Just what will happen to broadband prices with the VAT reduction announced today is hard to predict. If the rise had been from 17.5% to 20% then we can be sure we would have seen price rises, but it is likely broadband providers will simply take their cues from other areas in the retail market when trying to decide whether to pass on the reduction.

The reduction in VAT is temporary and will only last for 13 months before rising again from 15% to 17.5%. The temporary cut is worth around 50p per month on a £20 broadband subscription, which just about buys a packet of crisps.

A lot may hinge on how a provider prices its products, those which list and do all their budgeting based on a plus VAT basis will most likely simply pass the saving on. Those that only market at the consumer sector where VAT is inclusive and hardly warrants a mention in the pricing are likely to retain the 2.5% reduction in VAT and either use it to offset other rises in costs, or maybe increase usage allowances slightly.

Comments

Posted by chrysalis over 8 years ago
the sensible thing to do is do nothing and wisely use this 50p per customer on improving service quality. Any customer that whines about this 50p not been passed on (25p on £10) really is tight. Of course it only lasts a year so its little more than a tiny bonus to profits for a short term period. Perhaps will help the ipstream isps offset the recent central price increases.
Posted by adslmax over 8 years ago
I can't seen it will happen to many isp's to cut VAT (no chance!)

Same goes for BT phone bill, Sky Tv packages !
Posted by Silvereyes over 8 years ago
From a legal standpoint they have no choice. The amount of VAT charged is set by law and charging anything other than the specified amount is a CRIMINAL offence. Specifically, VAT Fraud which can carry a very stiff prison sentence.

From a practical standpoint I can't really see Customs chasing every Tom, Dick and Harry who decides to continue charging the previous rate but they might decide to make an example of someone.
Posted by Michael_Chare over 8 years ago
If an ISP fails to pass on the reduction in VAT that amounts to a price increase which would quite possibly give a customer on as contract, the opportunity to terminate.
Posted by CARPETBURN over 8 years ago
quote"If an ISP fails to pass on the reduction in VAT that amounts to a price increase which would quite possibly give a customer on as contract, the opportunity to terminate."

Rubbish, Prices on broadband packages and whats included regularly change. To even think about terminating a service you are happy with cos you aint going to save 50p a month and the price remains the same is sheer insanity..... This so called tax drop is a load of carp, cotton wool for the numpty brigade worrying thereself silly about a so called financial crisis.
Posted by baconbuttie over 8 years ago
How is it rubbish ? Perhaps you need to read a contract to see what one contains. Not passing on the VAT drop does mean a price increase, and if the contract includes an option to cancel because of a price increase, there's no arguing with it.

Have to agree with you about it being carp though. It's just smoke and mirrors from a government that can't accept fiscal failure. It just wants everyone to spend their way out of this, when it's spending unwisely that's got us here ... wherever here is !
Posted by AndrueC over 8 years ago
@CARPETBURN:I think it might give a legal opportunity to those on a fixed rate, fixed term contract but as you say - ditching a provider just because of a 50p price hike isn't sensible..unless it's Tiscali.

Then again the ISP only has to agree to reduce your subscription appropriately and that's that.

50p is nothing either way..and that's why this silly idea won't work. Just another publicity stunt by a desparate government.
Posted by jelv over 8 years ago
http://community.plus.net/blog/2008/11/24/vat-changes/

Plusnet are passing the reduction on.
Posted by idf03 over 8 years ago
A&A are passing it on:

http://aaisp.blogspot.com/2008/11/21-price-reduction-for-ongoing.html
Posted by SimpleRules over 8 years ago
Sky won't/couldn't pass it on, they're VAT registered in Luxembourg for broadband ... they'll be paying the same rate next week as they were last week.
Posted by mikeabram over 8 years ago
VAT update from BT The chancellor has announced that the VAT rate will be reduced to 15 per cent from 1 December 2008 until
the end of 2009.


BT will pass on the benefit of this reduction to customers from 1st December 2008, including subscription packages purchased from today.

It is BT'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.

We will be giving credits on future bills as appropriate.

More details will be published on BT.com shortly.
Posted by chrysalis over 8 years ago
yeah I forgot about the legal implications if isps dont pass it on I think they may be breaching contract although not 100% sure on this as the price the end user pays doesnt change.
Posted by SimpleRules over 8 years ago
There would be no legal implications unless firms claimed to be collecting VAT at 17.5%. They could simply put the base rate of their product up, to mean that with 15% VAT it comes out at the same level ... that'd be perfectly legal and many expect shops to do just that.

It's what the Government did with petrol, alcohol & ciggys so that us peasants couldn't enjoy a cut in taxes for once ... McBroon strikes again.
Posted by KarlAustin over 8 years ago
If the contract is based on a VAT inclusive price of £20/month for example, then that won't change if they don't pass the VAT reduction on, it'll still be £20 inclusive of VAT. Now if the contract is based on a price exclusive of VAT then that is a different matter.
Posted by toots66 over 8 years ago
It's less than 50p if the £20/month is inclusive of VAT. £20.00 = £17.02 + 17.5% VAT (£2.98). £17.02 + 15% VAT (£2.55) = £19.57. So the difference is 43p.
Posted by Spectre_01 over 8 years ago
"If the contract is based on a VAT inclusive price of £20/month for example, then that won't change if they don't pass the VAT reduction on, it'll still be £20 inclusive of VAT. Now if the contract is based on a price exclusive of VAT then that is a different matter." - KarlAustin

Bingo! All depends what was agreed when the contrac was signed. Fixed TOTAL price inclusive of VAT means they could if they wanted legally continue to charge you the same amount and alter the VAT calculation to give less back to the gov.
Posted by Spectre_01 over 8 years ago
Business customers paying 'ex-VAT' business rates would have a clear arguement, residential customers paying a total that includes VAT may not. The fact they most seem to be giving it back to the customer is good will from the ISP's in keeping with the spirit of the tax cuts.
Posted by shaunhw over 8 years ago
You can be sure, even if they don't pass it on, when the time comes for it to go back up again, the price will be increased pretty sharpish!
Posted by uniquename over 8 years ago
O2 is interesting. I can't see where it says that the banner prices are Vat inclusive, but they are! However in the T & Cs it says:-

8.9. The Charges are exclusive of Value Added Tax which will be charged at the prevailing rate.
Posted by PeteK over 8 years ago
The change in rate of VAT is a royal PITA as far as we are concerned presenting both INC and EX vat prices on the website and marketing material aimed at residential as well as business markets. However the site changes are in progress and billing will be adjusted over the weekend and you can rest assured that the saving will be passed to our customers. Lets hope others do the same in the spirit of the reduction rather than increasing "costs" by +2% to "cover" the cost of administration (as one provider stated today)
Posted by SimpleRules over 8 years ago
All the trouble Taggart McBroon has caused over this ... he could have just lowered taxes and given us our own money back, instead he's demanding every business in the country update their systems/reprint their catalogues and pass off 2.1(ish)% or else he'll start running them himself!
Posted by Spectre_01 over 8 years ago
Its a pre-election stunt nothing more. It'll give you back about £12 if you spend £500 - hardly the clincher if you've been eyeing up a new TV and it looks like VAT will rise permanently to 18.5% in the future to help pay back all the debt we're in.
Posted by PeteK over 8 years ago
19.6% to align with France has been touted..
Posted by chrysalis over 8 years ago
the way I see it is a way to give businesses a temp small boost in profits, I expect 99% of retailers to not pass it on but all the 2.5% boosts will addup. Any retailers that do pass it on the money saved is pocket change for the consumer.
Posted by Spectre_01 over 8 years ago
^^ Although not the intention of the treasury I think its the best way for the change to get used. Unfortunatly we're still the ones who'll end up paying for it.
Posted by CARPETBURN over 8 years ago
KarlAustin's short, simple but dead accurate post sums it up perfectly and 100% accurate, ive just look through my small print and that of other ISPs, they wouldnt be breaking the law at all, prices quoted include VAT no matter if its 15% or 150%. If what uniquename sames is true about o2 though people may have a case.
Posted by CARPETBURN over 8 years ago
Businesses paying for a service and pay an EXCLUDING VAT price have no arguement, they shouldnt even be affected, there price should remain the same and not rise or fall. (Technically of course).

New VAT rates are not due to 2010 at the earliest (more likely 2011) and i wouldnt listen to any figure thats being touted at the moment... When VAT went up to 17.5% originally from 15% some actually thought it would decrease while other so call "financial" *cough* people predicted 20%.
Posted by PeteK over 8 years ago
@CarpetBurn

Businesses don't pay an excluding VAT price, they have an option, assuming VAT registered to reclaim the VAT if a relevant purchase. The only exclusions are EU transactions which may be exempt and declarable / payable by the supplier under EU VAT ruling.

I would have thought you would have known this given your business and staff, or are you not large enough to require VAT registration?
Posted by 4thenet over 8 years ago
Our billing price is calculated when an invoice is generated, based upon the VAT exclusive price. We will of course change our billing rate to 15% on 1st December, so our VAT inclusive prices will all be reduced.

Business customers still have to pay VAT, the difference is that a business can claim it back.

4theNET Internet Ltd.
Posted by CaptainW over 8 years ago
Sky have confirmed they will be passing the saving onto customer's and are currently in the process of trying to work out the best way to action this - this is a statement given to all Sky call centre staff and is to be read out to any customer querying this; their head of Customer Service has stated this.
Posted by CARPETBURN over 8 years ago
quote"Businesses don't pay an excluding VAT price"

LOL
Posted by rasczak over 8 years ago
Carpetburns ignorance showing through again. Obviously his 'business' is not VAT registered or he would know that businesses who are registered for VAT don't pay the ex VAT price. The VAT is added to at the invoice and paid to the invoicer by the invoicee. The company then has to calculate themselves how much VAT they have spent that year, how much they have taken in and then either claim back or, more likely, pay back to HMRC, the difference.
Posted by PeteK over 8 years ago
@Cartpetburn

One would suggest you get your facts straight before looking like a complete moron in public. May I suggest if you don't know what you are talking about that you refrain from spilling your verbal horse hockey everywhere..
Posted by Silvereyes over 8 years ago
Indeed. Rather shot yourself in the foot there Carpetburn old chap.

Of course it could simply be the age old 'Management' thingy of leaving the financials to the accountant/officer manager/etc. which is a VERY BAD IDEA.

One of my previous employers went 'titsup' owning over 1/2 million in VAT. The office manager had been pocketing the VAT payments instead of handing them over to Customs and Excise as it was then.
Posted by Spectre_01 over 8 years ago
"do yourself a favour..... Never ever start a business" - CARPETBURN, maybe take your own advice there old chum, looks like someone dosn't actually know how VAT works.
Posted by PeteK over 8 years ago
@Silvereyes:

" One of my previous employers went 'titsup' owning over 1/2 million in VAT " - Tsk I would have thought you would have known better - this can't have happened as businesses don't pay VAT - Don't you know anything ;-)
Posted by CARPETBURN over 8 years ago
quote"Businesses don't pay an excluding VAT price"

I LOL AGAIN....... What do you think the "PRICE" is once the VAT is claimed back??? That would be an excluding VAT price.

All of you are also wrong about being able to buy a product or service that excludes VAT in the first place. I regularly sell and buy based on an excluding VAT price. So do many other businesses. Infact if you look at things as simple as online PC component retailers if you look hard enough you will find a few that sell to trade and business EXCLUDING the VAT from prices.
Posted by Spectre_01 over 8 years ago
Thats right CB, everyones wrong and you as usual are right.... (sarcasm)

The VAT may not be shown at trade level in the price your looking at but you still have to pay it. You then can later reclaim it in your yearly VAT return but that is reclaiming, you don't get to not pay the VAT in the first place.
Posted by PeteK over 8 years ago
@Carpertburn:

"What do you think the "PRICE" is once the VAT is claimed back??? That would be an excluding VAT price."

Yes indeed it is, and you've just contradicted yourself. The buyer pays the vat to the seller and then if an appropriately justifiable purchase and they (buyer) are VAT registered can claim this back on their return.

You really need to shut up unless you know what you are talking about as you are currently looking like a priz moron. I suggest you review www.hmrc.gov.uk long and hard.... or get a brain.
Posted by CARPETBURN over 8 years ago
^^^ LOL AGAIN at My new 2 bitter stalkers
Posted by Spectre_01 over 8 years ago
wow, so we post on the same threads as you and disagree with your incohearant jabbering that makes us 'stalkers' nice world you live in there.

Its funny how you prove your ignorance time and time again and still carry on after everyone points it out to you. You refuse to learn or simply can't and proving to be childish along the way - you = FAIL.
Posted by PeteK over 8 years ago
Bitter! Lol, why? It is not us talking out of our rear...
Posted by comnut over 8 years ago
shaddup, kiddies, and goto a forum where you can join the rest of the tax moaners!!

Posted by Dawn_Falcon over 8 years ago
Nah, Carpet's quite right. If you buy stolen goods from shady online retailers you don't pay VAT. Of course, it's illegal.
Posted by snapshotatsandy over 8 years ago
Some intelligent comments and advise would be appreciated instead of so much inane chatter

Thinker
Posted by beeflin over 8 years ago
Eclipse are passing it on :-)
Posted by rlhobday over 8 years ago
Tiscali:
"Our customers will benefit immediately from this change and all bills generated on or after the 1st December 2008 will reflect these VAT changes."
Posted by artmo over 8 years ago
I'm with Plusnet and they have already told us they will be reducing our charges to allow for the reduction in VAT.
Posted by CARPETBURN over 8 years ago
Looks like spectre boy and a few others were wrong and just as i said some ISPs will just increase the baseline price and the VAT so called reductions wont even come into play for a few.... Me included, no VAT reduction for me on ukonline and to be blunt couldnt care less, i think i can manage carrying on paying what i paid for the past 2 years.
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