Budget 2017: mobile phone users to face higher charges overseas
Using your mobile phone outside of the European Union is set to become more expensive as VAT will be added to your roaming charges.
At present UK mobile users pay VAT when they use their phone within the European Union, but no such charges are applied when phones are used outside the EU.
That situation will soon change as Chancellor Philip Hammond announced plans in his Budget speech to charge 20% VAT on calls, texts and data usage worldwide.
The new rule will be introduced in the 2017/18 tax year and is expected to cost consumers £45 million in the first year and £65 million a year thereafter.
Mr Hammond says this change will bring the UK in line with other countries and ensure mobile phone providers cannot use such inconsistencies to avoid paying VAT.
He told the Commons that he wanted to “introduce UK VAT on roaming telecoms outside the EU in line with international standard practice”.
Many people already choose to purchase foreign SIM cards when travelling abroad and this is likely to increase in popularity following this decision by the Chancellor. Read the Moneywise guide to avoiding high bills when travelling overseas.
Invented by a Frenchman in 1954 and ironically introduced in the UK on 1 April 1973, VAT is an indirect tax levied on the value added in the production of goods and services, from primary production to final consumption and is paid by the buyer. Its levying is complex, with a number of exemptions and exclusions. For example, in the UK, VAT is payable on chocolate-covered biscuits, but not on chocolate-covered cakes and the non-VAT status of McVitie’s Jaffa Cakes was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit. The judge ruled that the Jaffa Cake is a cake, McVitie’s won the case and VAT is not paid on Jaffa Cakes in the UK.