The case has been referred to the European Court of Justice after a VAT tribunal highlighted six points that needed clarification by the European court.
The UK government’s argument centres around the assertion that a public body could not be involved in an economic activity, meaning that VAT would not have been paid.
However the UK’s five 3G licence holders – Vodafone, O2, Orange, Three and T-Mobile – are arguing that the auction was conducted in a commercial capacity and therefore VAT would made up part of the overall £22.5bn cost, meaning it could be reclaimed.
‘The meaning of the word telecommunications could decide this case,’ Paddy Behan, a VAT specialist at Grant Thornton told The Financial Times. ‘If the operators’ definition is accepted by the court, it is hard to see how they could lose.’
MTD represents 'the single most significant change to the UK’s system of taxation in recent times', says Knill James partner Nick Rawson. So, how prepared are SMEs for digital tax reporting?
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Unincorporated businesses under the VAT threshold given an extra year to prepare before MTD becomes mandatory