Mobile companies in £3.5bn VAT dispute

The major mobile phone companies have bid this week to get back £3.5bn from
the taxman in their dispute over VAT on the 3G licences.

Hutchison 3G, 02, Orange, T-Mobile and Vodafone collectively paid £22.5bn to
acquire licences to use the third-generation video-streaming spectrum in the
year 2000, and are trying to reclaim VAT on their outlay.

The case went before the European Court of Justice on Tuesday, having been
referred by the VAT tribunals in September 2004.

The companies argued that they were engaged in an ‘economic activity’ in
purchasing the licences, whilst HM Revenue & Customs said that it was merely
regulating use of the 3G spectrum and that, as such, the transactions were not
an ‘economic activity’.

The case may be worth almost £1bn to Vodafone alone, as it paid almost £6bn
for its licence. The others paid around £4bn for their licenses.

The case is also set to be a bonanza for lawyers, with two magic circle firms
advising. Linklaters are representing all the mobile companies except O2, which
has employed Freshfields and Roderick Cordara QC.

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