Lyca Mobile loses £51 million VAT appeal over Plan Bundle pricing dispute
Staff Reporter
August 1, 2024
Major MVNO Lyca Mobile has lost a £51 million VAT appeal over the sale of its voice, text, and data bundles between 2012 and 2019.
A 55-page judgment by the First Tier Tribunal Tax Chamber disagreed with Lyca’s argument that VAT only became payable when the bundle data was used. Lyca had claimed that VAT could only be charged when the bundled services were actually used, rather than at the point of sale.
Face-value vouchers
Lyca argued that the Plan Bundles were face-value vouchers, categorizing them as retailer vouchers rather than single-purpose vouchers. The company maintained that the services within each Plan Bundle were supplied only as and when they were used. However, HMRC considered that those services were supplied when the relevant Plan Bundle was sold.
The VAT amounts being appealed covered the periods 2012 to 2015 (£6,319,980), 2015 to 2017 (£19,116,953), and 2019 (£25,707,095).
Tribunal ruled “Plan Bundles reflected the fact that services had already been supplied
Lyca’s lawyers contended that activating a Plan Bundle was not chargeable to VAT because, at that time, it was not possible to identify the nature and extent of the services to be supplied under the Plan Bundle with sufficient specificity. They argued that, from the perspective of the consumer, there was functionally no difference between a Plan Bundle and the top-up credit which customers bought.
However, Tribunal Judge Tony Beare stated:
“The simple fact is that the entitlements under the Plan Bundles were not monetary amounts that could be used to acquire future services. Instead, they reflected the fact that services had already been supplied. For that reason, the entitlements did not represent the right to receive future services, as required by condition 2, but instead represented the product of services which had already been supplied.”
