VAT extension to save UK consumers an estimated £1 million


30-12-2009

Pay-as-you go mobile phone users can ring in the New Year with extra money in their pocket, according to telecoms experts at Deloitte, the business advisory firm.

The added festive cheer comes following the announcement from HMRC that mobile phone companies will continue to benefit from the lower VAT rate of 15% until 6am on 1st January 2010. Although only applicable to pay-as-you-go customers, the extra 2.5% is expected to save customers a total of £1 million this New Year.

Kendra Hann, telecoms partner at Deloitte, said: “The extended VAT rate will serve as a benefit for individuals on non-contract mobile phones, particularly those that top up before the New Year. This is because tax is only declared by the mobile phone operator once a call is made, as opposed to when the top up is purchased. For that reason, top ups bought in 2009 will go a little further in term of value for the customer.

“There is a clear advantage for mobile phone operators as well, primarily from a cash flow perspective. Most telecom providers are currently able to delay VAT payments by sending customers a ‘request for payment’, as opposed to an invoice where tax is only payable by the company once the bill has been issued. However, with any increase in tax, there will inevitably be an increase in an organisation’s outgoings, no matter what type of business it is. Therefore, the extended 15% VAT rate will allow mobile operators to retain greater levels of cash within the business for a longer period of time, which is crucial in today’s economy.”

 


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