US firm demands VAT on apps bought up to two years ago - you DON'T have to pay

Squirrels, which is based in Ohio, contacted customers earlier this week who had bought its AirParrot or Reflector apps, which are available for iPhone and Android and help you stream from your phone or tablet to a big screen.

The email states: "We are contacting you today because our system did not collect VAT on the day of your purchase.

"Your Government requires VAT to be paid on all purchases. To remain in compliance with your Government we need you to complete one of the following options…"

The email goes on to ask recipients to pay VAT, provide their VAT number or certify their exemption from VAT.

MoneySavingExpert.com was alerted to the VAT claim by a thread in the MSE Forum. Forumite FrogMan said he'd received the email in relation to software bought in May 2017. Others in the forum and elsewhere on social media also reported getting the email, with some saying it related to purchases up to two years ago.

If you got the email, you DON'T have to pay

Under rules from HM Revenue & Customs, businesses must pay VAT even if they haven't charged this to customers. The Gov.uk website tells retailers: "You must account for VAT on the full value of what you sell, even if you… haven't charged any VAT to the customer – whatever price you charge is treated as including VAT."

After backlash from users, Squirrels has now reversed its original stance and published a statement on Twitter admitting it was at fault for the failure to collect VAT, and clarifying that customers AREN'T required to pay it retrospectively.

Squirrels saw a backlash from users that received its VAT email

Squirrels' statement says: "Certain Squirrels customers received an email about paying VAT for their Reflector or AirParrot purchases. We sent this email to customers who live in a country that requires foreign businesses to pay VAT on every purchase.

"Our system was not previously set up to include VAT in price totals. That has been corrected for future purchases. However, as the seller, it's our responsibility to collect, report and file the VAT charge on past purchases to remain in compliance.

"The VAT error was our mistake. Customers are not required to retroactively pay this tax, but we appreciate those who have generously offered to pay the tax that should have been charged to them at the time of purchase.

"Note: If you did not receive this email, or if you received a free license or were part of the Humble Bundle promotion, you may disregard this message."

We've contacted Squirrels for comment and asked how many customers received the VAT demand and if it will now be emailing this clarification to those who did – we'll update this story when we hear back.