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Author Topic: BT no vat cease charge  (Read 18463 times)

icanbefound

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BT no vat cease charge
« on: May 02, 2013, 07:32:11 PM »

hello I have recently cancelled my bt broadband account as I moved in with my partner who also has bt account.  Bt told me that I had to close my account first before I could move my email address to my partners account.  I then recieved a £30 "cease charge" which appears to be some kind of cancellation charge.  The first odd thing about the charge is that it has no VAT on it.  Bt say that the charge is to ammend their records and discoonect/replace equipment. 

I cant help but feel that this equipment is likely to be hardwired on a card. I would like to know what equipment has to be replaced on my old line or disconnected and why any charge for doing this work should not have VAT charged on it.    BT say that it is compensationary charge.  I presume that it is Openreach that does this.

I appologise if this is not an appropriate post on this forum but I am interested in the technical difficulties required to disconnect broadband which I imagine will evolve over time.  I am surprised that there is no VAT. charge.
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Black Sheep

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Re: BT no vat cease charge
« Reply #1 on: May 02, 2013, 07:37:53 PM »

Never heard of that particular charge before ?? Basically, how are they gonna screw you down to pay it if you've moved on ??

You're right in as much as the PSTN/DSL will be 'ceased' by a robot. The actual 'recovery' will only be carried out on the 'Tie circuit' that carried the PSTN to the DSL equipment, or to the TAMS equipment. Generally, this will only be done if that particular set of 'ties' is required in order to provide a new circuit to someone, or if someone moves into your old premises and wants just a PSTN only circuit.

I'm not saying this isn't common practice by BT, its just I've never heard of it before.
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c6em

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Re: BT no vat cease charge
« Reply #2 on: May 02, 2013, 07:51:37 PM »


I think it's not VATable as you are not being provided with goods and/or services.

It is a compensatory/cancellation charge made by the provider of a service for the ceasing of the service by the user.
I think also cancellation charges for general reservations you make and then cancel are not VAtable however reservations for a specific item mentioned in the reservation may be as it is no longer a general reservation and the specific item was being kept back for you.

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kitz

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Re: BT no vat cease charge
« Reply #3 on: May 02, 2013, 09:20:05 PM »

The BT cease charge has been in operation for several years now, and has been various prices.   

According to this  £30 (non vatable) is the correct current fee :(



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kitz

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Re: BT no vat cease charge
« Reply #4 on: May 02, 2013, 09:42:44 PM »

Ps just found this on the bt wholesale website pricing list which states £24.74 plus vat  ::)

https://www.btwholesale.com/shared/document/Pricing_and_Contracts/SPPL/Section_44/Section44_Part3_01-April-11_Asymmetric_v2.doc
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icanbefound

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Re: BT no vat cease charge
« Reply #5 on: May 02, 2013, 11:16:46 PM »

Thank you very much for your replies.

Blacksheep
Quote
You're right in as much as the PSTN/DSL will be 'ceased' by a robot. The actual 'recovery' will only be carried out on the 'Tie circuit' that carried the PSTN to the DSL equipment, or to the TAMS equipment. Generally, this will only be done if that particular set of 'ties' is required in order to provide a new circuit to someone, or if someone moves into your old premises and wants just a PSTN only circuit.
whats going on is that I am keeping my old house but it needs a lot of renovation but as for now I am keeping the phone connected although I am with the post office and not bt.  What do you mean by the PSTN/DSL will be 'ceased' by a robot rather than ceased by the recovery of the set of ties?  Does leaving the ties on affect the working of a PSTN only circuit?  Is it that the ties are the crucial bit of equipment in a cease? sorry lots of questions and I have not a clue what those acrynims realy mean but will look them up.

c6em your the first person that I have come accross that sees that there is some way that things are not vatable. I kind of want to understand it as it might be useful, not that I am vat registered.
Quote
I think also cancellation charges for general reservations you make and then cancel are not VAtable however reservations for a specific item mentioned in the reservation may be as it is no longer a general reservation and the specific item was being kept back for you.
  where I lose it is how does this apply to doing something to telephone/internet equipment somewhere.  This charge seems to be raised by bt to pass on to openworld.  I would expect a chain of vat on that.  The other thing I cant get my head around is that the line comes to my house, for the presant it is not going anywhere and with the trend that all lines would become broadband+ in the future so why would bt want a system that tried to keep reverting to an old nonbroadband state?  Are these ties very expensive?

Kitz thanks It looks like back in 2007 that they were having trouble with this charge and that it was VATable then.  There seems to be no charge if the user "migrates" like move house/phone and stays with bt yet the cease charge would suggest that bt still has to cease on the first phone and connect to the new, could I presume that the cost of that would then have to be carried by those paying the cease? Having said that bt must pay other monies to openworld for broadband like for the maintanance of ties so it seems to be a bit odd that the randomness of ceaseing and not migrating should rely onme not being in a position to migrate.

thank you all

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kitz

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Re: BT no vat cease charge
« Reply #6 on: May 03, 2013, 01:16:08 AM »

>>> There seems to be no charge if the user "migrates" like move house/phone and stays with bt yet the......

There is a BTw charge for both new connections and migration.  Some ISPs do pass on this charge to the customer, but a lot of ISPs pick up the tab in order to encourage you to go with them.   

I cant comment on the VAT element, but it would appear most ISPs seem to pass on the fee as £30 - aside from Plusnet who pass on £25

>>> where I lose it is how does this apply to doing something to telephone/internet equipment somewhere.

It may help if you have a look inside the BT exchange.

When you get adsl broadband, a BToR Frames engineer will wire up your line from the MDF on to an ADSL panel block (patch panel).  Which panel your line is wired up to depends on which type of adsl you have ie LLU such as TT, Sky etc often tend to all be grouped on their own same patch panel.  It doesnt matter so much with BTw based ISPs such as BT, Plusnet, Zen etc as they will use the same BTw MSAN.

>>>> Are these ties very expensive?

In the context of what Im about to explain below:-
~ The tie pair is the BT name for 'your' pair of wires at the exchange from the MDF and on to the adsl equipment, such as the DSLAM/MSAN or handover frame. 
~ Jumpers is the wiring into the patch panel.


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AFAIK the PSTN (telephone voice) can be ceased automatically, as can in 'theory' the ADSL...   but......
..... and here comes the but...  (I stand here to be corrected by BlackSheep as hes our resident BT expert).....

At about the time that BTw introduced the cessation charges there were a lot of problems with LLU ISPs having 'Tags' on the line and this was causing huge problems during migration.   A TAG on the line is when an ISP hasnt released ownership of the adsl aspect of the line and that ISP is said to own the line. 

If a line wasn't ceased correctly, then it was still possible to attain a sync because your tie pair is still connected to the patch panel.. and on to the relevant DSLAM/MSAN.   

You would not have full internet access though because either/and/or  the ISP hasnt authorised you on to their network or in the case of BTw you are not authorised at the RAS (which is where most of the automatic stuff happens).

So what could happen is that when you cancelled your adsl, your line could still be wired up to the patch panel - this is known as Jumper in Place (JIP)...   your line could be hooked up to say a TT patch panel for ever more, even if you may have cancelled your adsl with TT.

If you were migrating, then this wouldnt matter because on that day the BToR Frames guy takes your pair from the TT panel and moves it over to say the BTw group of panels.

Even today there is the odd occasion where a delay in connecting up a new adsl connection could be subject to problems or delays because the Jumper is in Place on say an LLU ISP's panel.  Obviously this wouldnt cause you a problem as you have moved away and dont care..  but the new house owner may not be so happy if they are trying to get DSL but another ISPs tag is on the line for that phone number. 

There were also a few occasions where some exchanges had problems if Jumpers were left in place and not enough patch panels - or spaces on the patch panel - for new DSL subscribers.  Insufficient Patch Panels still can on occasion cause problems and delay.

I believe that even newer technology has fairly recently been introduced to help overcome such problems...  but rolling back the clock to the period when the cessation charges was introduced,  LLU was in its infancy and many of us on here will remember just how hard it was to move between certain ISPs and how often it all got mucked up... and how hard it could be to get tags removed. 

Hope this helps make things a bit clearer, and no doubt BS will be able to correct if I got anything wrong.
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Black Sheep

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Re: BT no vat cease charge
« Reply #7 on: May 03, 2013, 09:42:09 AM »

Yeah, like you ever get anything wrong !!  ::) ;D ;D

Kitz is bang on with her comments. The only thing I can correct, after proof-reading it a hundred times  ;), is the terminology used for existing wiring ........... they are known as LIJ's (Left In Jumpers). For the OP, 'Jumpers' relates to the 'Jumper wires' used to connect services together at the Telephone Exchange. They are just a pair of wires 0.5mm in diameter, and it's these that will connect your PSTN (Public Switched Telephone Network -- or much easier to explain, your telephone number), to the DSL (Digital Systems Logic -- or, your Broadband Port).
The PSTN and DSL frequencies (PSTN= Low Frequency Analogue. DSL= High Frequency Digital) are 'mixed together' and sent down a pair of wires to your premises. The micro-filters that should be plugged into each telephone socket that is in use, ensure the correct frequency and mode are given to the equipment plugged into the sockets. No micro-filter= DLM (Dynamic Line Management) reducing your line speed. Most, but not all ISP's employ DLM.

Basically, when you ring to cancel your line (PSTN and DSL). The CP/ISP will put a 'Stop' on the PSTN and (as Kitz states) ensure you cant get beyond the RAS (Remote Access Server) with your DSL, basically you will have synch on your router but wont be able to get on-line. In a nutshell, the voltage for both PSTN and DSL is still there, but of no use.
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kitz

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Re: BT no vat cease charge
« Reply #8 on: May 03, 2013, 12:44:54 PM »

Thanks BS for the additional info - LIJs I shall try to remember that.. or even better if I get chance do a page about all the BT terms.    (something else to add to the roundtoit) ;)

---

So to summarise the cessation fee is supposedly to cover the fee for removing your tie pair from the patch panel. 

In the very early days of adsl this didnt matter because all ISPs went through a BTw DSLAM and migrating of ISPs is done on a realm basis at the RAS and therefore a line could stay connected to the same patch panel and a remote request sent to block the adsl at the RAS.
   
With LLU however, the hardwiring to the ISPs own equipment (In-span handover frame --> MSAN) meant a move to a different patch panel which is done by a BT Openreach Frames Engineer.   During the earlier days of LLU certain LLU ISPs became infamous for not releasing tags properly and even 'slamming' telephone lines (taking them over without customer consent.   A new procedure was put in place and BTw took back some control which allowed them to resolve such episodes faster.

It was around this time that the cessation fee came into effect. As mentioned previously it isnt so much of an issue if you are with a BTw based ISP such as BT, Plusnet, Zen as BTw still has control at the RAS to say which realm (ISP network) you go on.  *

However, if BTw charged a cessation fee just for LLU providers and not for BTw based lines..  then the LLU providers and OFCOM would be screaming blue murder. So in the interests of 'fairness and competition'... then the fee must be passed on to all ISPs.


*Im not certain on this, but I suspect there are plenty of cases where BTw based lines are simply switched off at the RAS and the jumpers left in place.  TBH I dont blame BTw if they do..  because if a new home owner takes over the line and decides to go with a BTw based ISP then its easier and quicker for BTw to control it all via the RAS rather than having to get someone to hardwire it again.   However regardless if someone from BToR does have to physically move the wires.. OFCOM rules state that BTw cant charge LLU suppliers more than they would their own, so the fee remains the same.

If you so wished, you could probably check whether your jumpers have been left in place, by attaching your modem/router and seeing if it will sync.

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c6em

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Re: BT no vat cease charge
« Reply #9 on: May 03, 2013, 07:08:16 PM »

I can't really add anymore to my initial comments - I'm a professional engineer not an accountant/tax expert.
I'd guess there will be no train of VAT from BTwholesale to BT retail.
(Same applies to early termination fees on mobile phone contracts - they will also be nonVATable.

Generally as well as nonVATable items there are items/services which are subject to VAT, however the VAT that these are subject to is not presently at the full (currently 20%) rate - it might even be zero.
You could try asking on the MSE tax sub-forum if you want to know more - there are some very clued up people on it.

The basis on which cancellation charges are not vatted is based on the ECJ decision quite recently (relatively speaking) as copied below:
ECJ case C-277/05 Société thermale d’Eugénie-les-Bains
On 18 July 2007, the European Court of Justice made its judgement on case C-277/05,
Société thermale d’Eugénie-les-Bains, concerning deposits retained when a transaction was
cancelled. The Court ruled that articles 2(1) and 6(1) of the Sixth VAT Directive must be
understood to mean that amounts paid as a deposit in the context of contracts for hotel
services subject to VAT, in cases where customers make use of their right to cancel and the
hotel operator retains these amounts, must be considered as flat-rate compensation due to
termination of the contract, to compensate the damage suffered as a result of the customer’s
failure to conform to the contract, with no direct link to any service provided for valuable
consideration, meaning that these amounts are not subject to VAT.



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c6em

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Re: BT no vat cease charge
« Reply #10 on: May 03, 2013, 08:15:28 PM »

As a further thought:
Black Sheep has very helpfully said what might or might not be done as part of the cessation but I think the OP needs to step back from linking the charge to the actual work done.
There is a tendency these days in consumer land to want to link such charges to the actual time spent and then claim they are 'outrageous'.  Example might be producing a copy of a bank statement for £5.  The claim naturally is that its done by computer and costs 5 pence.

Trying to cost up the price being charged against the work actually being done is fundamentally wrong as it does not take into account in anyway the overheads of running a business which have to be paid whether or not any work is actually done. (Rent paid for buildings being an example).
So in my £5 bank statement example, the cost of producing the sheet might well be a few pence - but the cost of the Bank having and maintaining the software, the security, the staff, the printing machine, makes the cost far higher once these overhead costs are dumped onto the 'doing cost'.  Of course how you split up and allocate overhead costs into areas within the business is part of the practice and art of financial accountancy.
You are not really paying for the time of the job to be done, that is trivial - you are paying your share of the costs for the supplier having the machines to do the job in the first place.

So rather than looking what is done for the £30 one needs to look at it as simply an averaged out charge for the aggro involved in the customer ceasing the line.

Mind you I come from a business to business dog eat dog environment  where you simply charge as much as the customer will bear and if they are not outraged then you are not charging them enough  - any connection to the cost of doing a job is purely incidental.

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Black Sheep

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Re: BT no vat cease charge
« Reply #11 on: May 03, 2013, 08:30:01 PM »

Good point c6em.
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icanbefound

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Re: BT no vat cease charge
« Reply #12 on: May 04, 2013, 03:47:03 PM »

These are absolutly fantasic responses.  Thank you all. They are concentrating my thoughts as I paint the fence (country brown is not the same colour between wilko and ronseal) I will condense my thoughts and get some questions out if thats alright

c6em  I have put a post on mse forum and have put it in internet access forum and am hopeing for a relpy on what principles of VAT the ceases charges work.  I am struggling to see how this is a canceling a deposit issue.  I have found this on the web from Ofcom concerning the cease charge.  They call it a final word but I am not sure why
http://stakeholders.ofcom.org.uk/consultations/addcharges/pes_statement

Quote
7.'Cease' charges

If a customer decides to cancel a broadband service (and doesn't plan to switch to a new company which also uses BT's network) they may receive a 'cease' charge. This even applies if they have completed their contract. The company is passing on a charge which it has to pay, to BT Openreach.
 
Ofcom's final guidance is that a cease charge is probably fair, provided: the charge is made clear to customers before they sign on the line; and it's based only on the actual costs that come with ceasing a service.
   obviously "only" and "actual" costs will have something to do with the length of string
« Last Edit: May 04, 2013, 03:49:11 PM by icanbefound »
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kitz

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Re: BT no vat cease charge
« Reply #13 on: May 05, 2013, 12:25:56 AM »

BT retail is about the only ISP that I can find that states this is not subject to VAT for their home users.

BT Wholesale quite clearly pass on to the ISP as a VAT rated fee ie £24.74 plus vat - linky

Plusnet rate it as VATable  ie £25 inc VAT or £20.83 ex VAT for business customer.
Most other ISPs say £25 + VAT or £30 inc VAT.

Even more curious is the fact that BT Retail charge their Business users £25 + VAT for the cease fee - link.


So... if BT Wholesale is billing BT retail £24.74 plus VAT, then BTr will be claiming back this VAT element from the Inland Revenue.   If BTr are then claiming its a zero rated service they then wont be paying anything in Tax to HM Revenue & Customs.. netting them a nice little earner of £5.06 from each residential customer.

Im not quite sure if they should be doing this, because surely its fiddling VAT and the IR.. its certainly stretching some limits.
You can bet your bottom dollar that they pass it through correctly for their business users because they know, business users and companies will in turn be claiming the VAT element back.
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kitz

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Re: BT no vat cease charge
« Reply #14 on: May 05, 2013, 12:53:24 AM »

Out of curiosity Ive just found your thread on MSE.

The guy on there seems to think that its in the realms of penalty for breach of contract or early termination.

Quote
no VAT applies because you are not paying for a service or for goods, you are paying compensation to BT for failing to remain in contract.

However, you are not paying a penalty for early termination and you have fulfilled your contract.  You are supposedly paying for BT Openreach to 'pull those 2 little wires out of the MDF'. 

A service that is deemed VATable by BTo/BTw and just about every other ISP and even BTretail's business users.  The one exception to the rule seems to be BTretail residential customers.


--------

Quote
Ofcom's final guidance is that a cease charge is probably fair, provided: the charge is made clear to customers before they sign on the line; and it's based only on the actual costs that come with ceasing a service.

hmmm in that case... since BT Retail is claiming its non-VATable then surely they should either be passing on the fee as £24.74...  or should say its £30 inc VAT


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Edit and stop press!!!

WOOAH..... Look at BT retails official pricing list for residential customers. Link

Quote
6. Cessation Charge
A cease charge of £30.00 (Inclusive of VAT) is payable if you cease your broadband service and do not request and use a migration access code or another recognised transfer process to move to another service provider. This charge is not raised if you are moving home and BT is unable to provide the service at the
new address





Im beginning to think that the sentence "Charge will be £30. This charge is compensatory and not subject to VAT." is a mistake. 

Look at section 5 of the TariffGuide  Thats the one where the charge (quite correctly) is not subject to VAT because that is compensatory.
« Last Edit: May 05, 2013, 01:09:42 AM by kitz »
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