You’ve finally got that amazing smartphone you’ve hungered after for weeks or months. You’ve entered into a nice long 18-24 month contract so you could afford the cost of the device but then disaster strikes. Maybe your phone is stolen and you’ve no insurance and either need a new smartphone or that old nokia 3310 that you’ve pulled out of the drawer as a back up aint going to reap the rewards of a 5GB data allowance. Maybe you’ve lost your job or that times are so tough you cannot afford that 50-100 euro per month plan anymore. SO you call to cancel your mobile phone contract only a few months into it. No problem says the network. A quick calculation means you owe us an enormous sum (as in the remaining months of your contract times your normal base monthly fee). Hurts doesn’t it.
Well remember that while you may owe that outstanding money if you do want to cancel as you did, with open eyes, sign that contract you do not have to pay the VAT charge on top of that fee. Under the law cancelled contracts results in no supply taking place so if there’s no supply of services then VAT should not be charged. Unfortunately many networks do not understand this and add VAT on to your charge so the next time you end up having to cancel a contract for what ever reason make sure you’re not charged VAT. It can be a hefty sum at 23% of your monthly fee. You can quote the info below from Irish Revenue’s own website.
A charge levied by a supplier when a customer makes a cancellation (“cancellation charge”) and a supply does not take place, is to be treated as falling outside the scope of VAT by virtue of it being regarded as compensation and not a payment in respect of a taxable supply.