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Mobile phone firms deny VAT overcharging

Four mobile phone firms have denied overcharging some of their customers by levying too much VAT.

Orange, Three, T-Mobile and Virgin Media applied the new 20% VAT rate to monthly bills generated from 4 January 2011.

These covered extra calls some customers had made before that date, when VAT was still at 17.5%.

The firms say they followed the guidance of HM Revenue & Customs, but may help any customers who are upset.

"If a customer is particularly unhappy we will deal with them on a case-by-case basis," said a Virgin Media spokesman.
Eight pence

All four firms denied they were profiteering, pointing out that they do not keep the VAT but simply collect it and hand it to the tax authorities.

The issue has arisen because companies which provide a "continuous supply of service" - such as phone firms - are allowed by HMRC to levy the prevailing VAT rate at the time the bill is generated, rather than when the call was made.

The phone firms in question explained that an apparently excessive VAT rate would only apply to a minority of customers - about 15% in the case of Orange - who in the days before 4 January had made extra calls exceeding their main bundle of services.

The companies explained that the "excess" VAT would in fact amount to about eight pence per customer.
'Minority of customers'

The phone customers' main tariff bundles are paid for in advance.

Three pointed out that this meant its contract customers would therefore receive their pre-paid January calls at an advantageous 17.5% VAT rate.

"The minority of customers that went out of bundle in December will have been billed at the new VAT rate for that use," said a spokeswoman for Three.

"However, because call packages are paid in advance, almost all customers are net beneficiaries as they will have paid the old VAT rate for their January call package," she added.

Virgin Media said its customers had also benefited from previous changes to VAT: "It's worth noting that when the VAT was at 17.5% in December 2008 and then dropped to 15% in January 2009, the same rule applied and their December bill produced in January was at 15%, despite some calls being made whilst the rate was 17.5%."

Although none of the firms have given a firm commitment to repay any disgruntled customers, they have all said they would be sympathetic to anyone who called them to complain.

Orange said: "Whilst we don't feel that many people will be out of pocket with this, for those who feel they are, they should get in contact with us and we'll review their situation."

T-Mobile made an identical commitment.

"If contract customers are concerned about how VAT charges have been applied to their bill, they should call our contact centre," said Three.

Other phone firms such as BT, O2, Sky, Vodaphone and Talk Talk were able to split their bills to take account of the VAT change.

BBC News

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