Charged VAT for a returned device

[ShivangiK]

Last month I took out a new mobile contract but then decided I didn’t want it so returned it within the 14 day cooling off period. But this month I noticed that I still get charged the VAT for the phone even though I returned the device. VAT charge is about £200

I spoke to someone from the complaints team today and they said that I will still get the charge for the VAT even though I returned it and they can’t remove it. 

Has anyone experienced the same thing? Because this has never happened to me before

[Brotherkennyh]

You should absolutely get the VAT back if the phone was unopened and unused.
I suspect Three have some accounting issues going on at the moment that they are keeping quiet about.

I have recently asked for my Business account to be billed Ex VAT. Three now tell me that's not possible. They must bill me for the VAT and I have to claim it back. Happy to do it, just never heard of that before.

[sc1999]

I agree about the VAT refund however every VAT registered company must charge VAT which you must pay, even if you are not registered. If you are VAT registered then the VAT you pay out becomes an input. All VAT you put on your sales invoices becomes an output. Every quarter all outputs - all inputs = the amount payable to HMRC. If you are VAT registered you must charge, and collect, VAT on your sales. There is no such thing as allowing your customers not to pay the VAT on your invoices. 

How VAT works: Overview - GOV.UK (www.gov.uk)

[JonathanB]

Hi @ShivangiK,

I strongly suspect there's been some sort of misunderstanding here. Our bills only show the overall VAT but this should automatically be factored into any credit, bank refund, or card payment reversal we apply. Please don't share any private information here of course but can you explain this in a bit more detail please?

From what I'm understanding your phone was worth approximately £1200 including VAT but only the £1000 has came back to you?

Is this against a Device Finance agreement, or did you buy the phone outright?

Thanks,
Jonathan

[ShivangiK]

Hi Jonathan,

So my bill says this which will probably help understand it - 

Total charges before VAT - £10.80 

VAT at 0% on £1,138.00 CR - £0

VAT at 20% on £1,148.80 - £229.76

Total charges after VAT £240.56

And yes it was from a Device Finance agreement - Device plan amount: £1,138.00

I spoke to around 6 advisors in the last few weeks and they all mentioned not to worry and that I will get the refund back and when I spoke to the complaints team they said no you won't get the VAT charge back, so I'm really confused.

[ShivangiK]

@JonathanB I may be getting this wrong but I assume my bill saying VAT at 20% on £1,148.80 is including the phone as well? 

[JonathanB]

The device value will have VAT on it, but that should be covered by a combination of an upfront payment, and the loan advance.

You might need to check further into the bill, but the actual due amount for that 1st Direct Debit should just be your airtime. I'm assuming based on the figures you shared around £13 including VAT?

If that's definitely not the case and you have a bill stating you have approx £200 to be collected let me know, and I'll see how we can get this looked into further.

Thanks,
Jonathan

[ShivangiK]

So when I cancelled my contract I was put on a one month rolling contract instead which is added to the bill.

When I go further down my bill the breakdown looks like this - 

25GB Lite SIMO 1M S - 11.87

25GB Lite SIMO 1M S - 16

One-off charges

Early Upgrade Fee - 164.30

Apple iPhone 15 Pro Max 256GB Black T - 1,002.50

Monthly Service Credit  - 45.87

Which when all added up gets to 1148.80

And yes I've already had the £240 come out of my account today unfortunately

[sc1999]

Early Upgrade Fee - 164.30. You will have to pay that as it will be the balance owing on your previous device/airtime contract and is not VAT. This leaves £75.30 to identify assuming that your £240 is exactly that amount.

[ShivangiK]

That I understand but the bill shouldn't say - VAT at 20% on £1,148.80 - £229 - It should deduct the cost of the phone when calculating the VAT as it's been returned

The advisors also agreed and said that I was charged more on VAT