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TalkTalk Telecom Limited v The Commissioners for HMRC

[2023] UKFTT 12 (TC)
TalkTalk gave a discount for paying bills quickly. They thought they could reduce their VAT based on this discount, even if customers didn't take it. The tax court said the law didn't allow that, and that the discount wasn't offered in the right way.

Key Facts

  • TalkTalk offered a Speedy Payment Discount (SPD) to customers paying bills within 24 hours.
  • TalkTalk accounted for VAT based on the discounted price, regardless of whether the discount was taken.
  • HMRC assessed TalkTalk for £10,606,226 in underpaid VAT.
  • The appeal concerned the interpretation of Value Added Tax Act 1994 (VATA), Schedule 6, Paragraph 4(1).
  • The SPD was offered on a separate webpage, not within the main terms and conditions.
  • Services were billed in advance (e.g., line rental) or arrears (e.g., call charges).

Legal Principles

Interpretation of statutes should consider wording and purpose.

Marleasing S A v LA Comercial Internacional de Alimentación SA (1990)

National legislation must conform with EU law as far as possible.

Marleasing

Conforming construction: highly muscular approach to bring national legislation into conformity with EU law; can depart from strict and literal meaning but must go with the grain of legislation.

Test Claimants in the FII Group Litigation v HMRC [2012]; Wilkinson v Churchill Insurance Co Ltd [2012]

Time of supply: services are supplied at the earlier of payment and performance.

VATA s 6(3) and (4); Article 62-66 of PVD; Reg 90 of VAT Regs

Consideration for VAT: includes everything obtained or to be obtained by the supplier in return for supply; excludes price reductions by way of discount for early payment where the discount is claimed.

Article 73 and 79 of the PVD; VATA s 19; Schedule 6 Para 4

Post-supply rebates: taxable amount reduced accordingly; conditions determined by Member States

Article 90 of the PVD; NLB Leasing doo v Slovenia (C-209/14)

Hansard can be used for interpretation if legislation is ambiguous, statement by minister is clear and unequivocal.

Pepper v Hart [1993]

Outcomes

Appeal dismissed.

While Para 4(1) of Schedule 6 to VATA, as interpreted, conflicted with EU law, a conforming construction was not possible without fundamentally altering the legislation. Further, on the facts, the SPD did not meet the criteria of Para 4(1) because for advance billed services, there were no terms allowing a discount until the moment of payment, and for arrears billed services it constituted a post-supply rebate rather than a discount.

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