Proposed VAT Increase in January 2011

[Len Baker]

Given the proposed VAT increase of 2.5% effective from 4th January 2011 I was wondering how Thomsons would implement the increase for cusomers booking before January.

 

We for example for our June 2011 holiday have paid £150 x 2 = £300 deposit & have a balance to pay in April 2011 of £2520. If Thomson pass on the increase to cusomers our final invoice will increase by about £53.62.

 

I've asked our Thomson Travel Agent who says we will only pay our originally agreed price, (nothing in writing re vAT) but I have my doubts. The tax point for April 2011 would mean 20% VAT applies & not 17.5% as in the original calculation.

 

Also I am told there are avoidance clauses in the VAT laws which may (nor 100% sure) stop us paying the balance due pre 4th January.

 

What is the best way to clarify the situation? Perhaps Thomsons should say categorically that either:-

pre 4th January agreed prices remain in place for customers for payment at the originally agreed date or:-

if paid in full pre 4th January the original price stays or:-

customers must pay 2.5% more on their balances due or:-

Thomsons will absorb the increase which is incidentally less than 2.5%.

 

Has anyone any information to add?

[kruzseeka]

No, but thanks Len for raising an interesting point - and one which could have financial implications for many of us.

 

We are in a similar position to you having booked a June 2011 cruise and will have to pay the balance by 04.04.11 - after the tax implementation date. We too would prefer to pay before 4th Jan if that would avoid the increase (tax avoidance hopefully rather than tax evasion! :eek: ).

 

The sums involved are very similar too so we would have a £50+ additional charge if Thomson don't absorb the increase - or the 'sale' is exempt by virtue of a contract having been entered into prior to the tax change.

 

As you say there wil no doubt be some guidance/clauses in the law which dictates what is/isn't allowable but in the meantime, we could do with a definitive answer from Thomson - or are there any tax advisors/inspectors out there who can tell us what the situation is? (We promise not to have a go at you whatever the ruling is! I KNOW it's not your fault! :D)

[GerScot]

No, but thanks Len for raising an interesting point - and one which could have financial implications for many of us.

 

We are in a similar position to you having booked a June 2011 cruise and will have to pay the balance by 04.04.11 - after the tax implementation date. We too would prefer to pay before 4th Jan if that would avoid the increase (tax avoidance hopefully rather than tax evasion! :eek: ).

 

The sums involved are very similar too so we would have a £50+ additional charge if Thomson don't absorb the increase - or the 'sale' is exempt by virtue of a contract having been entered into prior to the tax change.

 

As you say there wil no doubt be some guidance/clauses in the law which dictates what is/isn't allowable but in the meantime, we could do with a definitive answer from Thomson - or are there any tax advisors/inspectors out there who can tell us what the situation is? (We promise not to have a go at you whatever the ruling is! I KNOW it's not your fault! :D)

 

You do NOT pay VAT on a cruise as it is seen as a form of transport to which VAT does not apply.

[kruzseeka]

You do NOT pay VAT on a cruise as it is seen as a form of transport to which VAT does not apply.

 

Well thanks for that prompt response - with good news too!!! :D

 

I have just checked my Thomson invoice and true enough there is no element of VAT itemised. I can now give myself another £50 to spend with that saving - or is that logic a bit suspect? Nevermind, I'll not think too hard about that - Spa treatment here I come! ;)

[Len Baker]

Thanks GerScot. You are correct

 

I hope I have not started an unnecessary panic.

 

Sorry folks but there are other threads on this & other sites. There appears to be no VAT on cruises. Apparently its a complex subject.

[GerScot]

Well thanks for that prompt response - with good news too!!! :D

 

I have just checked my Thomson invoice and true enough there is no element of VAT itemised. I can now give myself another £50 to spend with that saving - or is that logic a bit suspect? Nevermind, I'll not think too hard about that - Spa treatment here I come! ;)

 

 

Ah now then!! Spa treatments being a "service" are subject to VAT!

[vwgolf]

As an accountant I find the way VAT is treated on many different things to be very interesting! Cruises are, indeed, zero rated as far as VAT is concerned so long as they meet a number of conditions, including the destinations. Just about every cruise (and flight for that matter) that we are likely to take will be VAT free so there's no need to worry.

 

If you're really interested, the Revenue have a booklet on the subject:

 

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ShowContent&id=HMCE_CL_000161&propertyType=document#P243_23456

[kruzseeka]

Ah now then!! Spa treatments being a "service" are subject to VAT!

 

 

Spoilsport!!! I shall ignore that!!! :D:D