Thursday, 16 October 2014

VAT free!

I have purchased a few small LED lights recently, from two different sites. Interestingly, both are offering these "VAT free" for a limited time.

It does puzzle me - why this "VAT free" incentive on two apparently different web sites. I guess it could be some tax incentive, but if that is the case why do both sites insist that you enter a discount code to get the incentive. Surely it would simply be selling items with no VAT, simple?

One site said they would pay the VAT :-

When I ordered they showed a reasonably sensible looking order confirmation :-

The only problem I have with this is that it still shows an amount of VAT charged when they say "0% VAT on all orders" which is a very clear (and wrong) statement.

The second site (as these 1.5W bulbs are too dim, apparently) was slightly different. For a start they say "save 20%" :-

Well, taking VAT off is a saving of 16⅔% and not a saving of 20%. The actual discount is indeed only 16⅔% so they are lying. But when you get the order confirmation it gets even more messy :-

What the hell is this? £57.00 with discount of £11.40 does not make £47.50. Now, £9.50 is 16⅔% of the total, which is good, except for the fact they say that it is "VAT free" so there should be no VAT!

Both sites list the discounted prices on the site, and the second told me that they list VAT exclusive prices on the site (which is wrong for a consumer site). Listing a price and saying "save 20%" one would expect 20% off the listed price. In fact, at checkout, it is the higher price, and then you get 16⅔% off when entering the discount code. Second site has been reported to trading standards.

How do these people not have a massive VAT inspection?

Update: Second site have agreed to update their banner!


  1. My understanding is that VAT is something the seller pays based on the value of their sales. It's not something that the buyer owes (Although the seller can and usually does of course pass on the cost to the buyer). Is that correct?

    1. Interesting question, and for the first case it raises the point of whether the seller can in fact "Pay the VAT" for the buyer. Even so, the amount of VAT due is normally based on what the item is actually sold for, i.e. any discount applied in any way reduces the VAT that is due, being 16.66% of what is actually paid. I wonder how HMRC see this?

    2. As long as HMRC get the VAT due on the final sale price, I doubt they really care.

      The fundamental problem here is the retailer describe it as "VAT Free", when what they actually mean is "a discount *equivalent to* being VAT Free" - that's what the bigger retailers (the ones with tax accountants and lawyers) tend to put in their small print.

  2. And hell, if you get to claim the VAT back, you're onto even more of a winner really :)

  3. It is not VAT free, and should not be advertised as such. It is discount equivalent to VAT. It's marketing rubbish.

  4. As soon as HMRC would ask what is going on, the supplier would show their receipts which show the correct amount of VAT charged. Then all that is left is their factually incorrect marketing strategy, which HMRC is not interested in.

    So then who would be the right body? ASA? I think you can guess their level fo interest here…