A regional press ad for an estate agent stated, "0.9% SELLING FEE" in large bold text. Smaller text stated, "+VAT".
The complainant challenged whether the price claim was misleading because it was not inclusive of VAT.
IMS Residential Ltd said all of their customers knew the fee was 0.9% + VAT of the selling price. They said they had never received any complaints or misunderstandings about their fees before.
They maintained that the government's business website stated that they could quote VAT as a percentage because the final selling price was not known. They acknowledged that they also needed to include the current rate of VAT (20%) in the ad. They said that they would ensure that the rate of VAT would be added to their ads immediately.
The ASA understood that the government's business website to which IMS Residential had referred was the BIS Pricing Practices Guide (PPG). The PPG advised that, where a fee was based on an as yet unknown sum of money (for example, the sale price of a house), advertisers should either quote a fee which included VAT or, if it was difficult to calculate, make it clear that, in addition to the fee, consumers would have to pay VAT at the current rate.
The CAP Code required that quoted prices include non-optional taxes, duties, fees and charges that applied to all or most buyers. However, if a tax, duty, fee or charge could not be calculated in advance, ads must make clear that it was excluded from the advertised price and state how it was calculated.
We noted that in this case the selling fee was a percentage of the selling price, and we understood that VAT was charged on the fee. The total fee, including VAT, therefore could have been expressed as a percentage of the selling price. Rather than "0.9% + VAT", the total selling fee could have been given as "1.08%", because that would be the total fee including VAT, regardless of the amount of the selling price. Therefore, we did not consider that IMS Residential would have been unable to state a fee which was inclusive of the rate of VAT, even though it would be expressed as a percentage, rather than a fixed price. Although we acknowledged IMS Residential’s willingness to amend their advertising, we did not consider that their proposed changes were sufficient.
Because it was possible for a VAT-inclusive fee to be calculated in advance as a percentage, we considered that the stated percentage fee should have included VAT. Because that was not the case, we concluded that the ad was likely to mislead.
The ad breached CAP Code (Edition 12) rules 3.1 3.1 Marketing communications must not materially mislead or be likely to do so. (Misleading advertising), and 3.17 3.17 Price statements must not mislead by omission, undue emphasis or distortion. They must relate to the product featured in the marketing communication. and 3.18 3.18 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. (Prices).
The ad must not appear again in its current form. We told IMS Residential Ltd to ensure that their price claims included non-optional taxes, duties, fees and charges which could be calculated in advance.