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T-Mobile VAT Setback Has Wider Ramifications

by Jason Gorringe, Tax-News.com, London

08 December 2010


Everything Everywhere (formerly T Mobile) stands to lose GBP4m after a European Court ruling said that the firm should charge value-added tax on fees charged to customers who do not settle their bills by automatic Direct Debit transfer from their bank accounts.

The company had been in a long-running battle with HM Revenue and Customs (HMRC) regarding the liability of the GBP3 surcharge to VAT, the company arguing that the charge was for a separate payment handling service. However, the ECJ said that the GBP3 charge is not for a separate service but is instead simply an additional charge for the principal supply of mobile phone services.

Karen Robb, Head of VAT in London at accountants Grant Thornton, commented: ”This is 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."

Tax experts suggest that the ruling sets a precedent for other companies making similar charges, and that HMRC will soon be undertaking similar assessments.

TAGS: court | tax | business | value added tax (VAT) | law | United Kingdom | HM Revenue and Customs (HMRC) | HM Revenue and Customs (HMRC) | telecoms

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