Property: Fees and VAT


INSIGHT
Published
Sep 3rd '20
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Advertising rules state “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.

 

If VAT can be calculated on fees and charges in advance then it needs to be included and not referenced separately. This rule also applies to percentage charges which are subject to VAT and there are key issues to bear in mind when referencing percentage charges that are inclusive of VAT.

 

  • Include VAT on percentage selling fees

The Advertising Standards Authority (ASA) upheld against a regional press ad for an estate agent that did not include VAT in the referenced percentage “selling fee”. The ad stated that there was a 0.9% selling fee and included smaller text below which stated “+ VAT” but the 0.9% “selling fee” that was quoted was not inclusive of VAT. The ASA stated that because it was possible to include the 20% VAT rate in the percentage selling fee, (which would take it to 1.08%), the 1.08% figure should have been quoted (IMS Residential Ltd, 5 November 2014).

 

Even if the final selling fee cannot be calculated in advance because it is dependent on the final selling price, if the selling fee is based on a percentage of that final selling price then the total percentage selling fee can be calculated in advance and should be included in any quoted selling fees. For example, a sales fee of 2.5% + VAT should be advertised as a 3% selling fee. Adding an “inclusive of VAT” type statement is optional.

 

  • Include VAT on lettings and landlord fees

All tenant and landlord fees should be advertised inclusive of the current rate of VAT. For example, a tenant reference fee of £200 + VAT should be advertised as £240. Adding an “inclusive of VAT” type statement is optional.

 

For the avoidance of doubt, this position applies to both letting agents and property portals. Advertisers may wish to consult the Competition and Markets Authority’s guidance for lettings professionals on consumer protection law.

 

See “Compulsory costs and charges: VAT“.

 

Source: Committee of Advertising Practice (CAP)

 

Note: This advice is given by the CAP Executive about non-broadcast advertising. It does not constitute legal advice. It does not bind CAP, CAP advisory panels or the ASA. CAP’s Advice Online entries provide guidance on interpreting the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing.

 

Read guidance on Buying or owning a leasehold home.

 

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