TaxCorporate TaxT-Mobile loses VAT case in European courts

T-Mobile loses VAT case in European courts

£3 charge to customers for failing to use BACS or direct debit to settle their bill is subject to VAT, says ECJ

A long-awaited VAT ruling by the European court has been lost by T-Mobile, costing the mobile phone business £4m.

T -Mobile, now known as “Everything, Everywhere”, had fought against the taxman for a £3 charge to mobile phone customers to settle their bill as not subject to VAT where they failed pay by either direct debit or BACS.

Everything, Everywhere had argued that the charge was for a separate handling service. But the European Court of Justice, disagreed, stating that it was simply an additional charge for the principle supply of mobile phone services.

Karen Robb, head of London VAT at Grant Thornton, said the decision was a “significant victory for the taxman”.

“Any businesses that make additional charges to customers who do not make payment by specified means such as direct debit or BACS, for example utility companies, need to urgently review their VAT position,” said Robb.

George Bull, Baker Tilly head of tax, said: “Any business that has submitted VAT claims that are similar to T-Mobile’s will be very disappointed by today’s judgment. Furthermore, any businesses still treating the additional payment charge as exempt from VAT are likely to receive an assessment from HMRC in the very near future.”

An HMRC spokesman said: “The ECJ has confirmed the UK’s view that payment related services, of the sort provided by T-Mobile, which are carried out in connection with supplies of other goods or services are not separate supplies for VAT purposes. We will consider the judgment carefully and publish guidance shortly in respect of any implications it may have for other payment related services.”

A T-Mobile spokeswoman said: “Further to the recent ruling from European Court of Justice, Everything Everywhere is reviewing the decision and considering its options. As all VAT has been paid when it was due, there is no additional VAT to be paid as a result of this decision.”

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