The Dreaded VAT

Published on 16 September, 2013

I hate VAT. I hate it as both a business owner and a consumer. But I hate it even more when it's not 'wrapped up' within the price of the product or service that I am purchasing, as a consumer.

So why do professional services, that are selling to the consumer, quote fees that are 'exclusive', or 'plus VAT'? It has never made sense to me.

When I go into a supermarket, I don't know which products incur VAT because the price on the label is the price that I pay. But there is VAT on some of these supermarket items - confectionery and crisps attract the standard rate of VAT, for example. But I don't have to consider it as an extra cost when I get to the till and pay what I owe.

So why then, do professional services including estate agents and solicitors quote their prices as exclusive of VAT when they are quoting direct to the consumer? The consumer can't claim the VAT back like a business can.

As an estate agent myself, the vast majority of my counterparts in the industry quote a percentage fee, "plus VAT". As if high street or 'traditional' estate agent fees aren't high enough already, adding VAT on top I'd argue is simply a con.

Estate agents say "VAT's excluded" as a throw-away comment, as if the additional cost is just a small extra that the customer has to pay as part of the pleasure of selling their home. Well it's not! The VAT on most estate agents fees will run into literally hundreds of pounds. It's industry practice to quote a fee and then add the VAT on afterwards - well, that industry practise is wrong.

The Committee of Advertising Practice (CAP), states that "quoted prices must include non-optional taxes, duties, fees and charges that apply to all or most buyers. However, VAT-exclusive prices may be given if all those to whom the price claim is clearly addressed pay no VAT or can recover VAT. Such VAT-exclusive prices must be accompanied by a prominent statement of the amount or rate of VAT payable."

That statement seems pretty clear to me. So, why aren't businesses quoting their entire fee, including the VAT? It's because a lot of the time, the discussion about fees is over the phone, or face-to-face.

As an example, let's take a typical estate agent on an appointment or 'free appraisal' as it's pitched. The agent will run through their spiel and then towards the end of the pitch, they will state that their fees are 1.5% + VAT. They won't put that in writing. They won't tell the consumer how much that VAT will actually set them back in pound notes. They'll just tell them "plus VAT".

Now, when the customer has decided to use said agent they will put the VAT in their contract, so that they are complying with CAP code. But, by that point it is more or less too late for them to reconsider. They've signed the contract.

This is NOT transparency. This is completely misleading to most people.

It's very often a throw-away comment by the agent at the end of the discussion and is clearly not considered by the consumer. And, there's the key word again - consumer. The consumer cannot claim the VAT back. It is not a business to business transaction. It is a business to consumer transaction, and as far as I am concerned, there is no place for VAT to appear anywhere in the quote. Sure, there will be VAT in the fee that the consumer pays, but they don't need to know about it, nor do they care about it in most cases. The consumer just has to pay it, and that is all they know or care about. They don't care if that VAT doesn't go in the pockets of the agent. In fact, as far as they are concerned, it does go in their pockets!

But, just like when you buy a packet of crisps, or you fill up your car at the petrol station, as a consumer you pay no attention to the VAT whatsoever.

In fact, do it now - Google a couple of estate agents and divorce or conveyancing solicitors. I'll bet the VAT(!) that you'll find more than one on the first page that is quoting their fee plus VAT. That's if they quote their fee at all of course!

To be fair, there are a few online solicitors and other professional services that DO include VAT in their fees, like our estate agency, Hatched.co.uk. But, 'many' is not good enough. It should be ALL with zero exceptions.

This is a practice that has to stop, because at the end of the day, it ruins what could have been a perfectly good experience for many people who have to use 'professional services'. And frankly, it leaves a bitter taste when it comes to paying the bill at the end of the transaction.


Adam Day
Hatched.co.uk 

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