VAT on estate agents' fees

[juliet704]

Is it usual for the agent to charge VAT on top of the percentage fee - effectively increasing the percentage?

[Fay Mousse]

Yes - but you pay the vat on the fee, not the sale price.

[Oneeyedvic]

It is normal - but don't forget that they are only collecting this for the governement - not keeping it for themselves.

I do have a problem with this though - as most Estate Agents typically deal with consumers (as opposed to business) they should (by law) advertise a VAT inclusive price as their fee. Only businesses that deal predominately with other businesses are able to advertise net figures.

http://www.hmrc.gov.uk/vat/consumers-basic.htm #2

[bednobs]

but how? Advertise as "3% selling fees plus 17-5% of that"
it's hardly catchy

[Fay Mousse]

They can't advertise a VAT inclusive price, because they don't know what the price will be until the property sells.

The best they can do is advertise x% plus VAT.

[Oneeyedvic]

Doesn't matter whether or not it's catchy - it's the law.

They should simply advertise a rate of 3.525% in your example (or more probably 3.5%)

[Fay Mousse]

The Code of Practice for Residential Estate Agents, set by the Ombudsman states:

Fees should clearly state whether VAT is chargeable; and they must be expressed as an actual amount plus VAT.

[Oneeyedvic]

It is not a legal requirement to be a member of the OEA (Ombudsman for Estate Agents) to be an Estate Agent, and therefore the OEA is fairly useless as a body (in comparison to say the FSA).

It is also quite worrying that they are encouraging their members to break the law - as you can see from the Customs & Excise site link above - it is a legal requirement when dealing with the public to display and advertise VAT inclusive prices.

[juliet704]

Thank you to all contributors for the information and discussion.