VAT Liability on Mobile Bundles Heads to Court of Appeal: Lycamobile Case

Lycamobile, a mobile virtual network operator, is disputing the VAT treatment of its mobile phone bundles, specifically whether VAT is due when consideration is received or only when the services are actually used. The value at stake is approximately £51 million.
Both the First-tier Tribunal and the Upper Tribunal ruled against Lycamobile, determining that the “real supply” is the right to use the allowances, supplied at the point of sale, with VAT due on the full payment. They concluded the bundles were not vouchers (or were single-purpose vouchers if considered as such) and distinguished the case from “preliminary transactions.”
Lycamobile has been granted leave to appeal to the Court of Appeal, indicating the ongoing nature of this dispute regarding the timing and amount of VAT on mobile phone bundles, with a specific point on retrospective adjustment for non-EU use before November 2017.

Source KPMG

Upper Tribunal Confirms VAT Due on Lycamobile Prepaid Bundles at Point of Sale, Dismissing Appeal

The Upper Tribunal (UT) upheld the First-tier Tribunal’s (FTT) decision that VAT is due at the point of sale for Lycamobile’s prepaid telecoms plan bundles, not as services are used.
The UT confirmed that the bundles do not qualify as vouchers under VAT law, either before or after 1 January 2019.
Retrospective VAT adjustments are required for non-EU roaming services used before 1 November 2017, but otherwise VAT is due immediately upon purchase.
The UT found that value added services included in bundles are ancillary to a single composite supply, not separate supplies.
Lycamobile’s appeal against HMRC’s £50 million VAT assessment was dismissed, providing clarity that VAT is due on the grant of rights to access services, regardless of actual usage.

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.