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 Advertising Standards Authority.
Rule 3.18 of the CAP Code states that "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".
How marketers should present the VAT in their ads will depend on who their customers are. The sections below give advice on various scenarios.
When customers are a mixture of consumers and businesses
When customers are consumers
Consumers usually have to pay VAT and cannot generally recover it. If customers are consumers, all prices quoted in ads should include VAT in the stated price. It is not sufficient to state a VAT-exclusive price accompanied by information that VAT is payable. When VAT is included in the quoted price, it is optional to include a statement to that effect.
The ASA has ruled against many ads which present VAT-exclusive prices to customers who have to pay VAT. Complaints about ads for event tickets have been upheld because the quoted prices did not include VAT and other non-optional fees. In one case, the advertiser argued that VAT could not be calculated in advance because, prior to consumers selecting a ticket, they did not know the buyer’s country of residence. However, the ASA considered that, given the claims appeared on the UK version of the website, most buyers would be from the UK, and would therefore pay the UK rate of VAT. The total ticket price should have included the UK rate of VAT (Viagogo AG, 07 March 2018).
Where some consumers are exempt from paying VAT for particular products, the VAT-inclusive price must still be stated unless everyone to whom the price is addressed do not pay VAT or can recover VAT. An ad for a personal alarm service breached the CAP Code because the quoted price did not include VAT. The advertiser explained that many of their customers were exempt from paying VAT. However, because not all customers were exempt from paying VAT, the ad should have clearly stated the VAT-inclusive price. The ad should also have made clear to whom the VAT-exclusive price was addressed, and should have been accompanied by a prominent statement of the amount of VAT payable (Lifeline24 Ltd, 13 February 2019).
Where an ad is clearly addressed to those who do not pay, or can recover, VAT, it is likely to be acceptable to state VAT-exclusive prices, providing the price is accompanied by a prominent statement of the amount or rate of VAT payable. An ad for mobility scooters which stated the VAT-exclusive price was not considered misleading, because the price was clearly addressed at those who were VAT exempt or eligible for VAT relief, and because the ad included a prominent statement that made clear the circumstances in which the scooter was VAT-exempt, and the rate of VAT that was payable (Local Mobility UK Ltd, 16 May 2018).
When customers are businesses
VAT-registered businesses normally don’t pay VAT, or can recover VAT. Therefore, the use of VAT-exclusive prices is likely to be acceptable in ads if the audience consists entirely of businesses. Where this is the case, it should be made clear in the ad that the price is exclusive of VAT, and who this price applies to. This is done by clearly addressing the VAT-exclusive price to those eligible for it.
It may be clear that an ad is addressing business customers from the context of the marketing communication. This could be the case from, for example, the name of the website, or the placement of the ad. If this is not the case, marketers should make the intended audience clear, such as by prominently stating that the price is a “trade price”. If it is not clear to consumers that the VAT-exclusive price is a trade-only price, the ad is likely to be considered misleading.
The ASA has upheld complaints against ads that failed to clearly address VAT-exclusive prices. A complaint about an ad for domain names costing 99p was upheld in 2017. In that case, the ASA considered it was acceptable for the advertiser to use VAT-exclusive prices, as it was likely most consumers who purchased a domain name were businesses. However, the ad did not make clear that the price only applied to those who did not pay VAT, or who could recover VAT i.e. by including ‘trade price’. For this reason, and the fact the price statements were not accompanied by a statement setting out the amount of VAT payable, the ads were deemed misleading (123-Reg Ltd, 19 July 2017).
When customers are a mixture of consumers and businesses
If customers consist of both businesses and consumers, VAT-inclusive prices should be given. Ads may also state VAT-exclusive prices, but marketers should ensure a VAT-inclusive price is given at least equal prominence to the VAT-exclusive price.
If both VAT-inclusive and VAT-exclusive prices are stated, VAT-exclusive prices should be clearly addressed to those who pay no VAT or can recover VAT, and should be accompanied by a prominent statement of the amount or rate of VAT payable (e.g. “Trade Price £X excl.VAT@20%”). Using “ex. VAT” and “inc. VAT” alone will not be sufficient to make clear to whom each claim is addressed and omits the rate of VAT.
In 2016, the ASA upheld a complaint about an ad for printing products which stated a VAT-exclusive price only, because the ASA considered both businesses and consumers may wish to purchase these products. The ASA told the advertiser to ensure that, where an ad was directed at both consumers and businesses, the VAT-inclusive price was given, and that VAT-exclusive prices were accompanied by a prominent statement of the amount or rate of VAT payable (Computer Risk Management Ltd, 30 March 2016).
For more information, see our best practice guidance on VAT-inclusive and VAT-exclusive price claims.