[Ben]

http://www.mobiletoday.co.uk/artman-test/publish/article_821.shtml

"Retailers claiming VAT on cashback deals are operating outside the law, Customs has said for the first time.

The information has sparked deep concern among retailers who are thought to have been falsely claiming millions of pounds of VAT. Many retailers have been in the dark about the legitimacy of VAT on cashbacks for some time.

Mobile obtained private documents sent from a regional Customs office to a retailer last month which leave little doubt on where Customs stands on the matter. The statement reads: ‘You make payments to customers by way of cashbacks, but this does not represent consideration for taxable supplies by the customers to you, so you are not entitled to treat the payments as including VAT, so cannot claim input tax.’

Dealers Mobile spoke to said the potential repercussions were huge. ‘I’d say nearly every [dealer] offering a cashback deal is claiming VAT,’ said one high-connecting retailer. ‘Look at the margins and the commissions there are out there and it’s pretty obvious lots and lots of dealers are claiming VAT.’"
[continued]

If you've taken a cashback deal from a smaller/lesser known dealer then I guess it's very possible they might not be around for your full 12 months! What's less clear is if any of the big guns are involved... e2save has always had knock-me-dead offers via cashback - I wonder if they were using the VAT 'loophole' also. Time will tell, but a thorn in the side of these irritating cashback details is just great IMHO :) If the retailers don't want the commission then lets have lower payments to them and cheaper product costs at source!

[3GScottishUser]

There have been some really dodgy offers floating around the Internet lately. The above advice is valuable, stick to known, established suppliers to have the best chance of having cashback honoured.

I have seen some quite silly deals offered lately, some that look good but involve you having to take out 2 contracts and claim cashback on both to get the headline pricing featured! Always read the small print very carefully and take note of how the cashback will be paid. It's a good idea to print out the webpage where the terms are explained and keep hard copies of any confirmation e-mails etc.

[Hands0n]

I tend to feel that, in any case, these cashback deals while sounding and perhaps even in fact being a downright bargain there is the attendent risk of dealing with an uncertain quantity. The integrity, stability and financial viability of the dealership. They are very obviously trading on smaller margins, passing some or most of it back to you, the customer. They will then [have to] rely on high volume of sales to make sufficient income to survive and thrive.

I can see this VAT clawback being a deathknell for some of the cashback dealers. The Inland Revenue will not give them much time to pay back any VAT owed. You could even see the DTI getting involved to make them cease trading and enter into insolvency or [at best] administration. Either way, the customer will suffer through loss of any certainty of future cashback payments.

As always Caveat Emptor (Buyer Beware) applies. Buying into a cashback deal while appearing compelling should be treated with great caution.

I agree with the advice, above, give us sensible and sustainable deals rather than all of this rather suspicious cashback nonsense.