The sale of 3G licences by the UK is not liable to VAT, an advocate general
at the ECJ has said.
The opinion saves the UK government a bill of more than £3bn in VAT that
could have been reclaimed by the 3G operators on the £22.5bn they paid for the
licences in the year 2000.
court opinion, available on the ECJ website, says that whilst the government
might be interpreted as having taken part in an economic activity in its auction
of the licences, it was still acting as a public body under a special legal
The case turns on whether or not the government was acting as a regulator, or
as an economic agent. If it is the latter, VAT of more than £3bn would be
The opinion says: ‘ Activities pursued by bodies governed by public law under
a special legal regime applicable to them are to be considered activities
engaged in as public authorities within the meaning of the first subparagraph of
Article 4(5) of the Sixth Directive. The exercise of public authority is not
precluded by the fact that, in fulfilling the responsibilities exclusively
allocated to it, the State makes use of a procedure derived from civil law or
receives a high amount of revenue from its activity.’
Greg Sinfield, the indirect tax expert at Lovells, said the opinion was as
‘The auction is an activity engaged in as a public authority and thus not
within the scope of VAT. The term ‘Telecommunications’ [integral to the VAT
rules under discussion] also does not cover the auction of licences.’ he said.
‘The government will be very pleased. This is just the Advocate General’s
opinion, but it is followed in 95% of cases. You can’t blame the telecoms
operators for trying because of the amounts of money involved.’
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