Lycamobile UK Limited v The Commissioners for HMRC

This decision relates to the treatment for value added tax (“VAT”) purposes of plan bundles (the “Plan Bundles”) which were sold by the Appellant to its customers in the United Kingdom (the “UK”) over a period comprising VAT periods ending 07/12 to 08/19 (both inclusive).

The Plan Bundles comprised rights to future telecommunication services – which is to say, telephone calls, text messages and data (together, “Allowances” and each an “Allowance”) – in some cases along with the right to access other types of services which are described in further detail below. There were hundreds of different Plan Bundles sold by the Appellant within the relevant VAT periods and the precise composition of those Plan Bundles varied, as described in further detail below.

As regards the VAT treatment of the Plan Bundles, the Appellant considers that the services contained within each Plan Bundle were supplied only as and when the services were used. In contrast, the Respondents consider that those services were supplied when the relevant Plan Bundle was sold. This is not simply a difference of timing. If the Appellant is right, then the consideration which the Appellant received for each Plan Bundle would be taken into account for VAT purposes only to the extent that the relevant Plan Bundle was actually used and only to the extent that its use involved a standard-rated supply for VAT purposes. Conversely, if the Respondents are right, then the consideration received for each Plan Bundle would be taken into account for VAT purposes in full regardless of usage albeit, in some cases, subject to a subsequent adjustment to the extent that the usage did not involve a standard-rated supply.

The Appellant accounted for VAT in respect of the relevant VAT periods on the basis of its view of the law. The Respondents’ view of the law is reflected in the three VAT assessments which are the subject of the two appeals to which this decision relates. Those are as follows:

The assessments referred to in paragraphs 4(1) and 4(2) above were confirmed by the Respondents in a review conclusion letter dated 15 February 2018 and the Appellant appealed against the review conclusions in a notice of appeal dated 9 March 2018.

The assessments referred to in paragraph 4(3) above were confirmed by the Respondents in a review conclusion letter dated 7 April 2020 and the Appellant appealed against the review conclusions in a notice of appeal dated 6 May 2020.

In the appeal referred to in paragraph 5 above, the Appellant advanced four grounds of appeal. Those were that:

In the appeal referred to in paragraph 6 above, the Appellant repeated the grounds of appeal set out in paragraph 7 above and added a fifth ground, which is that it reserved the right to argue in due course that the assessments to which the notice of appeal related were not made to the best judgment of the Respondents.

The aggregate amount of VAT that is in dispute between the parties pursuant to the assessments which are the subject of this decision is approximately £51 million. However, the parties have agreed that, in this decision, we should not deal with the question of whether or not any of the assessments were made to the best judgment of the Respondents or with any questions of quantum. Instead, we should simply set out our conclusions in relation to issues of liability in principle, leaving the questions of best judgment and quantum to be determined by the parties by mutual agreement or, if necessary, by us at a subsequent date.

For the purposes of the hearing, we were provided with various documents. Those documents included:

We were also provided with the evidence of two witnesses. They were:

Regrettably, we were unable to accept the witness evidence in its entirety. EA’s evidence in particular was, on occasion, contradictory and, in certain respects, implausible and inconsistent with the written evidence, as we will explain in further detail in due course. We do not think that this was attributable to a desire to mislead us. On the contrary, we believe that both SJ and EA were honest and eager to assist us. However, there were good reasons why, despite those intentions, their evidence might not have been entirely accurate.

First, the VAT periods which were the subject of the proceedings had extended over a lengthy period – some seven years in total. In addition, the earliest of the relevant VAT periods had commenced almost 12 years before the hearing and the most recent of the relevant VAT periods had commenced almost five years before the hearing. A considerable period of time had therefore passed between the events in question and the hearing. In the context of a business involving the sale of a multiplicity of Plan Bundles which were changing in response to the demands of the market both during the period which was relevant to the proceedings and after that period, it was inevitable that the witnesses’ recollection of the terms of particular products at any time might not be entirely accurate.

Secondly, the witnesses were able to speak with authority only in relation to the areas of the business of which they had knowledge. For example, EA’s role as Global Head of Products meant that he was responsible for turning the feedback received from the Appellant’s sales representatives as to the demands of the market into products which met those needs. Once he and his team had created a product which met those needs, the product was handed over to others in the organization for marketing and promotion and for determining the legal terms and conditions attaching to the product. EA therefore had no responsibility for either the promotional material relating to the product or the legal terms and conditions attaching to the product. This meant that his understanding of the way in which a product worked when the product was created might well have differed from the way in which the product was described to the market in the promotional material relating to the product and from the legal terms and conditions attaching to the product. EA also had no legal qualifications, which meant that he could shed no light on whether the legal terms and conditions in the documents which we were shown were consistent with his understanding of the product to which they related.

EA also had no responsibility for determining the success of the product once it was being offered – the level of take-up of particular aspects of the product or the profitability or otherwise of the product. This meant that he could not comment meaningfully on the figures with which we had been provided showing the take-up of the various value-added services attaching to the Plan Bundles or the extent to which the Allowances in the Plan Bundles were used.

We will expand on the deficiencies in the witness evidence when we set out our findings in relation to those facts in the appeals which are in dispute. However, many of those facts are not in dispute and we will start by setting them out. They are as follows:

We now turn to the matters of fact which were in dispute between the parties.

One of the main areas in dispute at the hearing was the extent to which the VAS were important to customers acquiring Type 2 Bundles. The evidence of both SJ and EA was that the VAS were important to those customers and were included within the Type 2 Bundles for that reason. They said that the VAS were a significant part of the Appellant’s strategy to increase its customer retention rate (which they referred to as “stickiness’). They testified that the VAS were chosen in response to feedback from the Appellant’s network of sales representatives in order to match the offering of competitors.

To that end, SJ and EA explained that:

Whilst we have no reason to doubt the veracity of the business model described in paragraph 19 above in general, or to consider that the VAS were an artificial construct designed to secure any particular VAT outcome, we have concluded that we cannot accept the Appellant’s contention to the effect that customers acquiring Type 2 Bundles attributed meaningful value to the inclusion of the VAS within the Type 2 Bundles and we therefore make a finding of fact to that effect.

We have reached that conclusion for the following reasons:

Although there was some inconsistency in his evidence, EA’s testimony was ultimately that, for some part of the period which is the subject of this decision, between 2014 or 2015 and 2017, all customers with Plan Bundles were able to use each category of the Allowances set out in their Plan Bundles (apart from the Allowances contained in a Bolt-on or Add-on) and to receive telephone calls and text messages in any of 17 or 18 countries (including non-EU jurisdictions such as Australia, Hong Kong and the USA). EA said that this feature, which was referred to internally by the Appellant as “Roam Like Home”, was distinguishable from the non-EU Roaming Calls VAS in that:

EA added that, during the period in which it was operating, Roam Like Home took precedence over the non-EU Roaming Calls VAS in the jurisdictions in which Roam Like Home was available.

Ms Mitrophanous, who was appearing for the Respondents, said that she did not accept that the Allowances within the Plan Bundles could ever be used by way of Roam Like Home. She said that, instead, the position was simply that, during the period when Roam Like Home was operating, a customer who had a Plan Bundle to which Roam Like Home applied could use his or her PAYG credits in the specified non-EU countries without incurring roaming charges. In support of that proposition, Ms Mitrophanous made the following points:

We have found it difficult to reach a conclusion on whether to accept the evidence of EA on this question. On the one hand, we can see the force in each of the points set out in paragraph 24 above. On the other hand, although we agree that EA’s evidence was provided at a late stage in proceedings and was at times contradictory, we do have that testimony to the contrary. There are also the following points:

On balance, taking all of the points mentioned in paragraphs 22 to 25 above into account, we have reached the view that we accept EA’s evidence to the effect that, during the period in which Roam Like Home was operating, the Allowances in at least some of the Plan Bundles could be used from the non-EU countries which were mentioned in that promotion and we therefore make a finding of fact to that effect. We confess that we reach that conclusion with some misgivings because of the contradictory evidence which was presented to us and, in particular, the inconsistent testimony of EA. In the rest of this decision, we will refer to those Plan Bundles as “Type 3 Bundles”.

At the end of her written submissions in relation to Roam Like Home following the hearing, Ms Mitrophanous said that, if we were minded to find that any of the Plan Bundles were Type 3 Bundles, then it would assist the parties if we were to identify which of the Plan Bundles fell within that category. We decline to do that at this stage as, in our view, that process properly falls to be carried out only at the point where the detailed findings of fact relevant to best judgment and quantum are required to be made. It is perfectly possible that the proceedings never reach that point because the parties are able to reach agreement on those matters without further recourse to the First-tier Tribunal (the “FTT”). Should the identification of which of the Plan Bundles amount to Type 3 Bundles be one of the areas of disagreement between the parties that prevents them from resolving the issues of best judgment and quantum without further recourse to the FTT, then we will address this question at that stage although we will almost certainly require considerably more evidence and detailed submissions on that subject in order to do so. For present purposes, we will say only that, for the reasons set out in paragraph 26 above, we have reached the conclusion that at least one of the Plan Bundles was a Type 3 Bundle.

There was no debate between the parties at the hearing in relation to the importance of Roam Like Home to customers who acquired Type 3 Bundles. The Respondents’ main challenges in relation to the Type 3 Bundles were:

However, our view, given our conclusion that at least 1 Type 3 Bundle existed, is that, based on the fact that we were provided at the hearing with numerous posters and leaflets which featured Roam Like Home prominently on their face, Roam Like Home was of importance to customers who acquired Type 3 Bundles.

EA testified that a customer had a legal entitlement to a refund of the price paid for a Plan Bundle if he or she had not used the Plan Bundle within 24 or possibly 48 hours of its being purchased and both SJ and EA testified that the Appellant had a policy of offering refunds after that time albeit that no customer had a legal entitlement to that effect. However, no mention of either category of refund was mentioned in the terms and conditions. (The possibility of a refund within 24 hours of purchase in respect of an unused plan bundle was mentioned in paragraph 10.12 of the general terms and conditions but the heading to the section of the general terms and conditions in which that paragraph appears, along with EA’s testimony, made it clear that the paragraph applied only to “semi-post-paid” or “pay-monthly” plan bundles and those are outside the scope of the appeals.) We have therefore concluded that any refund which was provided to a customer who purchased a Plan Bundle was provided solely as a matter of enhancing customer goodwill and that there was no legal obligation to that effect on the part of the Appellant.

Given that this is solely a decision in principle and is not dealing with the issues of best judgment and quantum, there are two issues which we need to determine.

The first (“Issue One”) is to address the question of what service the Appellant supplied when it sold a Plan Bundle to one of its customers and when that service was supplied. Mr Rivett, who was appearing with Mr Ripley for the Appellant, contended that no service was supplied unless and until the customer used the Allowances within the Plan Bundle and that therefore the Appellant should not be required to account for VAT on the part of the consideration received for the Plan Bundle which was attributable to the portion of the Allowances within the Plan Bundle that was never utilised. In contrast, Ms Mitrophanous said that the sale of the Plan Bundle was the relevant supply and that the subsequent use of the Allowances within the Plan Bundle was not. As such, Ms Mitrophanous said that the Appellant was required to account for VAT on the entire consideration received for the Plan Bundle – whether or not the Allowances within the Plan Bundle were used – although she accepted that, for reasons which we will address in due course, there needed to be an adjustment to the VAT liability in certain cases to reflect any effective use and enjoyment of the Allowances within certain Plan Bundles outside the EU.

The second issue (“Issue Two”) arises only if we decide Issue One in favour of the Respondents and it is to address the question of whether a Plan Bundle was a face-value voucher falling within provisions of the legislation which provided that no VAT was chargeable on the issue of the voucher and that VAT was chargeable only if and to the extent that the voucher was used. There was a change in the applicable voucher legislation within the period to which this decision relates and therefore we need to address Issue Two in the context of both sets of legislative provisions.

Before addressing those issues, there is one procedural point which we need to address. That is the question of whether:

This is because, at the hearing, Ms Mitrophanous pointed out that no mention of the Subscription Services or the Type 3 Bundles had been made in the Appellant’s grounds of appeal or in the original witness statements for the hearing and that the first time that either of those had been mentioned by the Appellant was in EA’s second witness statement executed shortly before the hearing. She added that:

In our view, these criticisms are well-founded. It has undoubtedly made the task of the Respondents in these proceedings more onerous and is regrettable. However, that does not necessarily mean that the Subscription Services and Roam Like Home ought to be excluded from the ambit of the appeals. That would be the case only if the failure to include any reference to them in the grounds of appeal offends against the procedural principle to the effect that each party to litigation is entitled to know, in advance of the hearing, the case which the other party to the hearing is advancing.

In that regard, whilst it is necessary for each party in its pleadings to mark out the parameters of the case that it is advancing, there is no need for a party to plead facts or evidence. In McPhilemy v Times Newspapers Ltd [1999] 3 All ER 775 (“McPhilemy”) (at 792J to 793A), Lord Woolf MR noted that pleadings are “critical to identify the issues and the extent of the dispute between the parties. What is important is that the pleadings should make clear the general nature of the case of the pleader”. We have therefore considered whether each of the Subscription Services and Roam Like Home can properly be said to fall within the general nature of the Appellant’s case as that case was advanced in the grounds of appeal.

In answering that question, we would start by observing that it will have been apparent to the Respondents from the grounds of appeal that the subject matter of the dispute was whether VAT was chargeable on the sale of a Plan Bundle by reference to the entirety of the consideration paid for that Plan Bundle even though the Allowances contained within the Plan Bundle might never be used or might be used in a variety of ways (including from within a non-EU country). That was the general nature of the Appellant’s case and the Respondents have been aware of it from the start of the proceedings.

If we then turn to the Subscription Services, no part of the consideration which was paid for any Plan Bundle was attributable to either of those services. Instead, a customer wishing to access either of those services was required to pay a separate consideration in order to do so. It is common ground that that separate consideration is outside the scope of the present proceedings. Nevertheless, once a customer chose to subscribe for one of those services, he or she became entitled to use the Allowances contained within his or her Plan Bundle to access the relevant Subscription Service. The customer’s use of Allowances within the Plan Bundle in that way was no different from the customer’s use of Allowances within the Plan Bundle to contact family and friends. Each of them involved the use of telecommunication services when the Allowances were being used. The content of the relevant Subscription Service itself was being supplied in return for the quite separate subscription fee. As such, we consider that the use of the Allowances in accessing the Subscription Services clearly falls within the general nature of the Appellant’s case as it has always been understood.

The position is slightly less clear in relation to Roam Like Home.

On the one hand, it might fairly be said that:

On the other hand, it might fairly be said that the difference in degree between the customer’s use of Allowances within a Plan Bundle in a non-EU country under Roam Like Home and the customer’s use of Allowances within a Plan Bundle in a non-EU country under the non-EU Roaming Calls VAS is so substantial that the former does not fall within the general nature of the Appellant’s case as it has always been understood.

After reflecting on these respective positions, we have decided, on balance, that the approach described in paragraph 41 above is to be preferred. We say that because, whilst the facts and evidence in relation to the use of Allowances within a Plan Bundle under Roam Like Home might well be different from the facts and evidence in relation to the use of Allowances within a Plan Bundle under the non-EU Roaming Calls VAS, that difference is ultimately still only a matter of facts and evidence. It does not go to the question of whether the general nature of the relevant pleadings is insufficiently unclear.

We have therefore concluded that the use of Allowances within a Plan Bundle under Roam Like Home (and, hence, the Type 3 Bundles) should be included within the scope of the appeals.

We now turn to address Issue One.

It is common ground in these proceedings that, as all of the relevant VAT periods ended before the UK left the EU:

In the EU context, the relevant legislation was in Council Directive 2006/112/EC (the “PVD”), whilst the provisions which were enacted to reflect that legislation in the UK domestic context were set out in the Value Added Tax Act 1994 (the “VATA”).

The legislation in relation to Issue One is set out in greater detail in the Appendix. For present purposes, it suffices to summarise the effect of the relevant provisions during the period to which this decision relates as follows:

For the purposes of the hearing, we were referred to a number of authorities in relation to Issue One.

For convenience, we have grouped those authorities into two categories, as follows:

We were referred to the following authorities in which the question of what amounts to a supply for VAT purposes and/or in which the time of supply were considered.

In Lebara Limited v The Commissioners for Her Majesty’s Revenue and Customs (Case C-520/10) (“Lebara”), the taxpayer sold telephone cards to distributors, who then on-sold those cards to users in Member States. Each card was limited, first, to the face value shown on the card and, secondly, to a fixed period and represented the right to receive telecommunication services from the taxpayer. The CJEU held that the supply of a phone card to a distributor was the supply of a telecommunication service by the taxpayer to the distributor because the card contained all the information necessary for making calls using the taxpayer’s infrastructure and the definition of “telecommunications service” included “not only the transmission of signals or sounds as such, but also all services ‘relating to’ the transmission, and the related transfer of the right to use capacity for such transmission”. There was not a separate supply by the taxpayer to the user of the card – see Lebara at paragraphs [31] to [43].

In Kennemer Golf & Country Club v Staatssecretaris van Financiën (Case C -174/00) (“Kennemer”), one of the questions before the CJEU was whether there was a direct link between the subscription fees charged by a golf club to its members and the facilities provided by the golf club. It was held that such a direct link did exist and that therefore those subscription fees were consideration for the services provided by the golf club in making the facilities available to the members even though some of the members paying those fees did not use, or regularly use, the relevant facilities – see Kennemer at paragraphs [36] to [42]. In particular, the CJEU rejected the argument of the Netherlands government to the effect that the fact that certain members did not avail themselves of the facilities meant that that there was no direct link between the subscription fees and the services provided by the golf club.

In The Commissioners for Her Majesty’s Revenue and Customs v Esporta Limited [2014] EWCA Civ 155 (“Esporta”), a member of a health and fitness club for a fixed period of at least 12 months who defaulted on his or her monthly membership payments was denied access to the club while the default continued. The club did not terminate the defaulting member’s membership but sought to recover the defaulting member’s outstanding fees for the remainder of the membership period. The Court of Appeal, applying Kennemer, held that the arrears in payments remained consideration for the member’s rights of access during the fixed commitment period and were not damages or compensation for breach of contract. Accordingly, the arrears were consideration for the supply of membership services – see Esporta at paragraphs [26] to [30].

In MEO – Serviços de Cominicaçöes e Multimédia SA v Autoridade Tributária e Aduaneira (Case C -295/17) (“MEO”), the taxpayer agreed to supply its customers with telecommunication services at a lower rate as long as the relevant customer agreed to subscribe for a minimum commitment period. If the relevant customer chose to terminate the subscription early, he or she was obliged to make a termination payment which was equal to the aggregate subscription payments that he or she would have been obliged to make had early termination not occurred. The CJEU held that any such termination payment was not damages or compensation for early termination but was rather consideration for the supply of telecommunication services under the contract. There was a direct link between the termination payment and the services agreed to be supplied even though the relevant customer was not receiving the services following termination – see MEO at paragraphs [38] to [48]. The supply was made when the taxpayer put the customer in a position to benefit from the supply even if the customer did not avail himself or herself of that right.

In Vodafone Portugal – Cominicaçöes Pessoais SA v Autoridade Tributária e Aduaneira (Case C – 43/19) (“Vodafone”), the facts were similar to those in MEO except that the termination payment in each case was not simply an amount equal to the aggregate subscription payments that would have been due from the terminating customer in the absence of termination but was instead a different amount. It was held that this made no difference. There was still a direct link between the termination amount and the services which the taxpayer had agreed to supply – see Vodafone at paragraphs [35] to [44].

In BUPA Hospitals Limited and another v The Commissioners for Her Majesty’s Customs and Excise (Case C – 419/02) “BUPA”), the taxpayer attempted to pre-empt the withdrawal of zero-rating on its supplies by entering into a prepayment arrangement. Under the arrangement, the taxpayer contracted to buy goods for delivery in a later accounting period and paid in advance so that it might be able to recover the VAT input tax on the supply in the accounting period of prepayment. Under the contract, the goods to be supplied were listed in a schedule which could be amended by agreement until the prepayment was exhausted. The CJEU held that the arrangement did not achieve its objective because the prepayment rule in what is now Article 65 of the PVD was a derogation from the general rule that a supply of goods was made only when the goods were actually supplied and therefore had to be construed strictly. In order to fall within the ambit of the provision, all of the relevant information concerning the chargeable event, namely the future delivery and future performance, had to be known at the time of the prepayment. Thus, a payment for goods or services which had not yet been precisely identified at the time of payment could not be subject to VAT – see BUPA at paragraphs [44] to [51].

In Air France – KLM and another v Ministère des Finances et des Comptes publics (C-250/14 and C – 289/14) (“Air France”), the CJEU addressed the VAT treatment of consideration paid for non-refundable air tickets which were no longer valid as a result of customer “no shows” and invalid exchangeable tickets which had not been used during the period of their validity. The CJEU held that the taxpayer was required to account for VAT on the consideration because there was a legal relationship between the taxpayer and the relevant customer and a direct link between the consideration paid by the customer and the service supplied in the context of that legal relationship. The customer did not have the right to benefit from the performance of the taxpayer’s obligations until the time of boarding and the taxpayer fulfilled its obligations by putting the customer in position to benefit from the services.

MacDonald Resorts Limited v The Commissioners for Her Majesty’s Revenue and Customs (C-270/09) [2011] STC 412 (“MRL”) related to an arrangement in which customers of a hotel group acquired contractual rights (“Points Rights”) which they could then use to book accommodation in one of a number of properties that were subject to the arrangement or to obtain other services. In paragraph [15] of its decision in MRL, the CJEU noted that one of the questions which had been raised by the national court required it to provide guidance on the classification of supplies of services such as those at issue in the proceedings.

In approaching that question, the CJEU started by identifying the “ultimate intention” of a customer in providing consideration for the Points Rights, which was to convert the Points Rights into the services offered by the arrangement and not simply to obtain the Points Rights themselves. The CJEU pointed out that the acquisition of Points Rights was not an aim in and of itself for the customer. Instead, it was to be regarded as a preliminary transaction in order to be able to exercise the right to receive the ultimate services. Thus, it was only when the customer received the accommodation or other services following the exercise of the Points Rights that he or she could be said to receive the consideration for his or her initial payments and the service was fully supplied.

The CJEU added that, as regards the arrangement in question:

It followed that, since the real service was obtained only when the Points Rights were converted into the use of accommodation or another service, that was when the chargeable event occurred and it was only then that it was possible to determine the treatment for VAT purposes of the supply according to the type of service which was supplied and the place of supply.

The principle set out above applied even if its application gave rise to practical problems (see MRL at paragraphs [34] to [40]).

In Direktor na Direktsia ‘Obzhalvane I upravlenie na izpalnenieto’ – grad Burgas pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite v Orfey Balgaria EOOD (Case C – 549/11) (“Orfey”), the taxpayer was granted a right to construct a building on land owned by four private individuals and become the sole owner of certain of the property built on the land. As consideration for that right, the taxpayer undertook to design and construct certain of the property built on that land within a specified time frame and for no additional payment by the individuals. The CJEU held that the consideration received by the taxpayer for the construction services it supplied – which is to say the right mentioned above – could give rise to VAT provided that, at the time when the right was established, all the relevant information concerning the future supply of services was already known and precisely identified and the value of the right could be expressed in monetary terms – see Orfey at paragraphs [25] to [40].

In Marcandi Limited (trading as ‘Madbid’) v The Commissioners for Her Majesty’s Revenue and Customs (Case C – 544/16) (“Marcandi”), the taxpayer sold goods in its online shop and also through online auctions. A customer wishing to participate in an auction was required to purchase credits from the taxpayer in order to bid. The credits could not be used for any other purpose. In particular, they could not be used to make purchases in the online shop, they could not be converted into cash and they were not credited towards the price of any goods which were purchased in the auction. The CJEU held that, taking those features into account, the issue of the credits could not be treated as a preliminary transaction to the supply of goods but was itself a supply of services that was entirely separate from the supply of goods which might take place pursuant to the auctions. MRL was distinguishable – see Marcandi at paragraphs [29] to [32] and [49].

In The Commissioners for Her Majesty’s Revenue and Customs v Findmypast Limited [2017] ScotCS CSIH 59 (“FMP”), the taxpayer, through its website, provided access to records on genealogical and ancestry websites. A person who wished to search the historical records on the website was able to do so without charge. However, if the person wished to view or download most of the records on the website, he or she was required to pay. This could be done either by taking out a subscription for a fixed period or by using a system known as pay as you go in which, in return for a lump sum, the person received a number of credits which could then be used to view or download a record. The credits were valid only for a fixed period although unused credits could be revived if the person purchased further credits within two years.

Two of the issues which were addressed by the Court of Session (the “CS”) in FMP were:

As regards the first of those questions, the CS held that the existing case law had established the following principles:

Applying those principles to the facts in that case, the CS noted that the taxpayer was providing two services – first, a general search function and, secondly, the viewing and downloading of documents. The first service was not an end in itself. Instead, it was merely a means towards the customer’s ultimate end of receiving the second service. In addition, it was provided for free to members of the public regardless of whether or not they were customers. It followed that the consideration provided by a customer who acquired credits was provided solely for the second service and not the first (see FMP at paragraphs [26] to [33]).

Turning to the second question, the CS noted that:

Applying those principles to the facts in the case:

We were referred to the following cases in which composite supplies were considered.

In Card Protection Plan Limited v The Commissioners for Her Majesty’s Customs and Excise (Case C – 349/96) (“CPP”), the taxpayer provided a package of benefits to customers for a consideration. Customers were protected by insurance against financial loss if they lost their credit cards but the taxpayer also provided other benefits such as informing the credit card company of the loss, replacing locks and keys and other administrative benefits. The CJEU held that this gave rise to a single composite supply and not two or more independent supplies and that that single composite supply was a supply of exempt insurance services. It directed that, in a case such as CPP:

In Purple Parking Limited and Airport Services Limited v The Commissioners for Her Majesty’s Revenue and Customs (C – 117/11) (“Purple Parking”), the CJEU held that transport services provided by an airport parking provider to its customers and the parking service itself together formed a single complex supply in which the parking element was predominant. It noted that supplies of services for a single price, whilst not being decisive, might be an indication that the services together formed a single supply and that, on the facts in that case, the fact that the price charged by the taxpayer was calculated exclusively by reference to the time that the vehicle was parked and without reference to the extent of the transport use was an indication that the parking element in the supply was predominant – see Purple Parking at paragraphs [26] to [37].

In Město Žamberk v Finančni ředitelství v Hradci Králové (Case C – 18/12) (“Město”), in return for an entrance fee, the taxpayer provided access to an aquatic park in which customers could undertake both sporting activities and other types of amusement or rest. The former type of activities was exempt in nature, whilst the latter type of activities was taxable. The CJEU held that it was necessary to determine whether the facilities in the aquatic park formed a whole so that access to the park constituted a single supply which it would be artificial to split and, if so, identify the predominant elements of that single supply – see Město at paragraphs [27] to [36].

Before leaving the authorities in relation to Issue One, we should refer to the decision of the FTT in Hutchison 3G UK Limited v The Commissioners for Her Majesty’s Revenue and Customs [2018] UKFTT 0289 (TC) (“H3G”) because of the similarity between the facts in that case and the facts in the present case. Although the decision in H3G is not binding upon us, it is nevertheless of persuasive effect and therefore the reasoning adopted by the FTT in reaching its decision is potentially of some relevance to these proceedings.

H3G related to the VAT consequences of supplies of telecommunication allowances in return for monthly recurring charges. The taxpayer alleged that it was not required to account for VAT on the whole of the monthly recurring charges at the time when those charges were paid but should instead be required to account for VAT only on the portion of the charges which was attributable to those of the allowances that were actually used (at the time of such use) and even then only to the extent that such use did not involve the effective use and enjoyment of the allowances outside the EU. Thus, no VAT was payable to the extent that the monthly recurring charges related to allowances which were not used or to allowances which were effectively used and enjoyed outside the EU. The FTT rejected this proposition. It agreed with the Respondents that VAT was payable on the full amount of the monthly recurring charges at the time of payment, with a later repayment of VAT to reflect any use of the allowances outside the EU.

In H3G, as in these proceedings, the appellant relied on two alternative arguments – namely, that:

We will describe the FTT’s view in relation to the second of those arguments when we address Issue Two below.

So far as the first argument is concerned, there were two limbs to it.

As regards the first limb, the FTT noted that:

As regards the second limb, the FTT held that:

Mr Rivett started his submissions by explaining that, in relation to the matter we were considering, there were two distinct lines of CJEU and domestic case law. The first – as exemplified by Air France – was authority for the principle that, when a right was supplied, the supply of the right was the consumption of a service and gave rise to VAT at that point. The second – as exemplified by BUPA, MRL and FMP – was authority for the principle that, when a right was supplied, no supply occurred unless and until the right in question was exercised.

There were two noteworthy and related features of the second line of cases.

The first was that, in order for there to be a supply of goods or services, all the relevant information as regards the chargeable event needed to be known. That was an underlying principle of the PVD – see, inter alia, BUPA and Orfey. It was the supply of goods or services which gave rise to VAT and not the payment made as consideration for that supply. Although BUPA and Orfey were both prepayment cases, the principle that they set out – to the effect that no supply could arise until all the relevant information in relation to that supply was known – was a basic building block of the VAT legislation and therefore applicable in all cases and not just in prepayment cases.

The second feature, which was related to the first, was that, in the second line of cases, the acquisition of the right was not the ultimate aim of the customer – see MRL and FMP. In MRL, the purchase of Points Rights was not an aim, in and of itself, for the customer. Instead, that acquisition was a preliminary transaction antecedent to the conversion of the Points Rights into the right to occupy specific accommodation. It was only at that latter point that the customer received the consideration for his initial payment – see MRL at paragraph [24]. The same was true in FMP – see paragraph [31]. This was distinguishable from the facts in Marcandi where the credits which could be used to participate in the auction were an aim, in and of themselves.

The above principles were encapsulated in the Advocate General’s opinion in GE Aircraft Engine Services Limited v The Commissioners for Her Majesty’s Revenue and Customs (Case C – 607/20) at paragraphs [57] to [62]. In those paragraphs, the Advocate General was describing the two lines of authorities described in paragraph 83 above and distinguishing between the transfer of a right, as such – which was a complete supply of services, in and of itself – and the transfer of a right to a future supply of services – which did not give rise to a supply immediately because not all of the relevant information was known at that point in time.

Mr Rivett’s case was that the present facts fell into the second line of cases and not the first. This was because:

The second of those points explained why the decisions in relation to composite supplies such as CPP, Purple Parking and Město were of no relevance in the present context. This was not a situation where multiple different supplies were being made at the same time and therefore one could treat them a single composite supply with the characteristics of the element within that single composite supply which was predominant. Instead, the customer was being given the choice to receive one or more of several different supplies at some point in the future. There was no authority for the proposition that, in that case, any of the possible future supplies could be treated as being ancillary to any of the other possible future supplies. Before the composite supply authorities could be engaged, there needed to be existing identifiable supplies of different natures to which the composite supply rules could be applied. The composite supply rules could not be used in order to conclude that the right to one of several possible future supplies of a different nature should be treated as being made at an earlier point than it otherwise would be on general principles.

Moreover, doing otherwise would also be inconsistent with the underlying basis on which the rules applicable to vouchers were established by Council Directive 2016/1065 (the “Voucher Directive”). The fact that those rules contemplated the existence of both single purpose and multi-purpose vouchers showed that the composite supply rules were not engaged at the point when the right to several possible future supplies was granted. Otherwise, it would be possible to disregard at the point when the voucher was issued those of the possible future supplies envisaged by the voucher which might be said to be ancillary to other possible future supplies so envisaged.

In contrast to the second line of cases, cases within the first line (such as Air France) dealt with circumstances where the taxable person had done all that was within its power to perform a service but the customer didn’t allow the service to be performed because, for example, he or she failed to turn up. The facts in the present case were very different from that. The present case fell firmly within the second line of cases.

Mr Rivett added that the existence of the “effective use and enjoyment” rule in paragraph 8 of Schedule 4A to the VATA for the period prior to 1 November 2017 supported the arguments set out above because it showed that the time of supply of a telecommunication service could not be earlier than the time when the service was effectively used and enjoyed. The consequence of the Respondents’ approach was that a tax point would arise before that occurred and therefore before it was known whether or to what extent the services in question were within the territorial scope of VAT. Moreover, the Respondents’ suggestion that the VAT payable in this case could be adjusted after the tax point to reflect effective use and enjoyment in a non-EU country was misconceived. There was no sound basis for proceeding on the assumption that the tax treatment of a supply could change after its tax point. This was because:

Mr Rivett said that H3G had been wrongly decided. In particular, the FTT in H3G:

Mr Rivett acknowledged that the consequence of the Appellant’s interpretation of the legislation was that a significant part of the consideration which the Appellant had received for Plan Bundles would have fallen out of account for VAT purposes. However, he said that that was simply the consequence of applying the authorities mentioned above and, in particular, MRL. Moreover, it was implicit in the fact that VAT was a tax on consumption and a not a tax on payments. A payment made for a service that was not consumed was not subject to VAT. Non-taxation for those reasons had been expressly endorsed by the CJEU in MRL at paragraph [34] and by the CS in FMP at paragraph [2] as a necessary and unobjectionable consequence of the application of the rules governing the time of supply. The same non-taxation potentially arose in the case of the issue of multi-purpose vouchers.

Our views on the above submissions are set out in the paragraphs which follow. We have not summarised the submissions made by Ms Mitrophanous in relation to Issue One for the simple reason that, except for the point which is covered in paragraphs 125 to 127 below, where we respectfully differ from her analysis, we agree with them and there is no point setting them out twice.

In setting out our views, we have found it helpful to address each of the three different types of Plan Bundle separately as each of them raises slightly different issues.

We start with the Type 1 Bundles as the analysis is simplest.

Under the PVD and the related provisions in the VATA, when goods or services are supplied, the basic rule is that VAT becomes chargeable at the point when the goods or services are supplied. However, there are exceptions to that basic rule, one of which is that, when there is payment in advance for the goods or services, VAT becomes chargeable at the point of that prepayment. 

The case law of the CJEU shows that, as that is an exception to the basic rule, it needs to be strictly construed. In particular, the CJEU has held that a prepayment cannot accelerate the tax point for a supply of goods and services if all the information relating to the supply is not known at the point of prepayment. That was made clear in the BUPA case and it has been repeated in other CJEU cases since then. 

The CJEU authorities show that there is another quite separate – and logically anterior – issue which needs to be determined when a supply of services is made and that is that, before the time of a supply can be determined, it is necessary to identify the services which are actually being supplied in return for the consideration paid. In other words, it is necessary to identify the nature of the service which the supplier is agreeing to perform in return for the consideration paid by the customer. That issue – identifying the true nature of the supply which is being made – is not the same as identifying how the prepayment exception to the general rule as regards the tax point for the supply is to operate but it overlaps with it to some extent in the judgments. That is because the CJEU has sometimes supported its conclusion in relation to identifying the nature of the services which are being supplied by referring to the case law that prevents a prepayment from crystallising the tax point – see, for example, MRL at paragraphs [27] to [33].

By way of example, MRL was not a prepayment case. It was a case pertaining to the identification of the supply which was being made to the customer in return for the consideration paid by the customer. The conclusions drawn by the CJEU on that identification question were set out in MRL at paragraphs [27] and [28]. However, the CJEU then went on to support its conclusion in relation to the true nature of the supply by alluding to prepayment cases such as BUPA – see MRL at paragraphs [29] to [31]. In other words, instead of simply relying solely on its conclusion that the acquisition of Points Rights was a step that was preliminary to the real supply in that case, the CJEU supported its conclusion by setting out an analogy between that two-stage process and situations where prepayments were made. In making that comparison, it did not, in our view, set out any general principle to the effect that there can be no supply under the VAT legislation until all the relevant information in relation to the chargeable event is known.

In summary, we do not agree with Mr Rivett’s submission that there is an overarching principle within the VAT legislation (supported by CJEU case law) to the effect that the tax point for a supply of services can never arise until all the relevant information in relation to the relevant supply is known. Of course, the fact that the courts have never confronted that particular issue directly is not at all surprising because the situation in question will rarely arise. In general, at the point when a service is actually supplied, as opposed to when a service that has yet to be supplied is paid for in advance, all of the relevant information in relation to the supply will be known. 

The above conclusion also means that, in our view, any approach to the present case which involves identifying the uncertainties that existed at the time when a Type 1 Bundle was sold and then determining which of those uncertainties might be relevant in deferring the tax point for the supply comprising the sale of the Plan Bundle is not correct. The extent and nature of the uncertainties are not relevant. All that is required is to identify the real supply which is being made. We therefore differ in our views on that subject from the FTT in H3G.

It follows from the above that, in each case, before identifying the time when a supply of services was made, it is necessary first and foremost to identify the service which was being supplied in return for the consideration paid to the supplier. That is what the CJEU in MRL described at paragraph [32] as the “real service” for which the consideration was provided, as distinct from some preliminary step which was not, in and of itself, the purpose for providing that consideration. That process is not as straightforward as it might seem because there are circumstances where there are steps leading to a subsequent supply and it is necessary to determine whether those steps are merely preliminary to the eventual “real supply” or amount to a “real supply” in their own right. 

Identifying that dividing line was the issue which was being addressed in each of MRL and Marcandi and the CJEU reached a different conclusion in relation to the issue on the facts of each of those cases. In MRL, the steps in question – the acquisition of Points Rights – were held to be merely preliminary to the eventual supply of accommodation that was the purpose of the customer in entering into the arrangement whereas, in Marcandi, the steps in question – the acquisition of credits – were held to be the supply itself. 

The two-stage approach referred to above – namely, first identify the nature of the supply and only then identify the tax point for the supply either in the light of the general rule or by reference to the prepayment exception to the general rule – was exactly the approach adopted by the CS in FMP. It concluded at paragraphs [12] to [33] that the nature of the real supply in that case was the ability to view and download documents by using the credits and not the acquisition of the credits themselves and it did that without relying on the fact that, at the time when the customer purchased its credits, some of the relevant information relating to the supply was unknown. Having identified the nature of the real supply, it then went on to consider at paragraphs [34] to [54] whether the prepayment exception to the general time of supply rule applied.

We therefore consider the decision in FMP to be entirely in line with the CJEU case law described above. It is not in any way authority for the proposition that it is a principle of the PVD that, where a service has actually been supplied, no VAT is chargeable if some of the relevant information concerning the chargeable event is unknown at the time of supply. In FMP, having adopted what we consider to be the correct approach, the CS concluded that the acquisition of credits did not amount to a supply in and of itself but was instead a preliminary step to the eventual acquisition of the service of being able to view and download documents. It then went on to conclude that the prepayment exception to the general time of supply rule did not apply because not all of the relevant information in relation to the real supply was known when the credits were acquired.

Turning then to the facts in the present case so far as they relate to the sale of the Type 1 Bundles and the ensuing use of the Allowances in the Type 1 Bundles, we need to determine the true nature of those transactions, based on the legal and economic context in which they occurred, the relationship of the Appellant with its customers and the purpose of the customers in paying their consideration to the Appellant. In particular, in the light of the decisions in MRL and FMP, we need to ask ourselves whether the sale of the Type 1 Bundles was the “real supply” for which the customers contracted in buying the Type 1 Bundles – which is to say, a supply of services in and of itself – or was merely a preliminary step to the “real supply” – which was the use of the Allowances contained within the Plan Bundles in due course.

Having carried out that process, we think that the question permits of only one answer, which is that it was the sale of the Type 1 Bundles that amounted to the “real supply” in this case. When the customer acquired a Type 1 Bundle, he or she received the Allowances and that receipt was the customer’s purpose in purchasing the relevant bundle. At that point, the customer received a supply of telecommunication services in the same way as did the distributors in Lebara. The right in this case was not precisely the same as the right which was supplied in Lebara because, in Lebara, the right was simply the right to access the taxpayer’s telecommunication network per se. In this case, the customer already had access to the telecommunication network through his or her SIM card. However, the Allowances conferred on the customer the right to use that network for a specified amount of telephone calls, text messages and/or data.

In this regard, it is worth noting in passing that the supply of that right to use the Allowances was a supply of telecommunication services in and of itself. It was not merely a right to a future supply of telecommunication services – see Lebara at paragraphs [34] and [35]. It follows that we do not think that Section 7A(3) of the VATA has any relevance in this context as it appears to be envisaging circumstances where the creation of the right to future services is not, in and of itself, the supply of a service.

At the point when the customer acquired the Type 1 Bundle, the number of telephone minutes, text messages and/or data to which he or she thereby became entitled was known and the extent to which the customer then chose to use the relevant Allowances was irrelevant to the question of the VAT chargeable on that supply in the same way that, when a member of the golf club in Kennemer paid membership subscription fees, the facilities which he or she became entitled to use were known and the extent to which the member then chose to use those facilities in return for his or her membership subscription fees was irrelevant to the VAT which was chargeable in that case. The fact that the customer might then choose not to make use of some or all of the Allowances was irrelevant to the VAT analysis in the same way that the fact that the golf club member in Kennemer might have chosen not to use the facilities at all, or to use the facilities to a lesser extent than was available, was irrelevant.

On each occasion when a Type 1 Bundle was acquired, there was a legal relationship of reciprocity between the customer purchasing the Type 1 Bundle and the Appellant and a direct link between the consideration paid by the customer for the Type 1 Bundle and the right to telecommunication services in the form of the Allowances in the Type 1 Bundle. The supply was made at the point when the customer acquired the Allowances and the place of that supply was the UK, either because, prior to 1 January 2015, that was where the Appellant belonged or because, on and after 1 January 2015, that was where the customer belonged (see Articles 45 and 58 of the PVD and Section 7A(2) of, and paragraph 15 of Schedule 4A to, the VATA). Accordingly, VAT became chargeable at the point when the relevant Type 1 Bundle was sold and was chargeable on the consideration paid for the relevant supply. See also in this respect Esporta at paragraph [26], MEO at paragraphs [39] and [40] and Vodafone at paragraphs [31] and [32].

Despite the skilful advocacy of Mr Rivett, we do not see a parallel between the acquisition of the Allowances in the Type 1 Bundle and the acquisition of Points Rights in MRL or the acquisition of credits in FMP. In each of MRL and FMP, the intention of the customer in acquiring his Points Rights or credits was to use those Points Rights or credits at some future date to secure the service which was the customer’s real purpose. In MRL, that purpose was the right to accommodation that could be secured by using the Points Rights and, in FMP, that purpose was the right for the customer to view and download documents which the customer had found using the free search facility. In the words of the CJEU in MRL at paragraph [32], that was the “real service”. The Points Rights and the credits had no inherent value in and of themselves and their issue did not amount to a service in its own right. They were simply an intermediate preliminary step towards securing the ultimate desired end. That reality was reflected in features of both of those cases which are not present in this case and that is that:

It is in that sense that each of MRL and FMP refer to the principle in BUPA. In each case, the reason why all the relevant information in relation to the chargeable event was not yet known was that the services which the customer wished to obtain using the Points Rights or credits had not yet been identified. In effect, at the initial stage, the customer had merely acquired a “currency” – whether it was Points Rights or credits – which he or she could then use to obtain the supply that was the desired end point. The “currency” itself was of no inherent value to the customer.

There is a significant difference between, on the one hand, the Points Rights in MRL and the credits in FMP and, on the other hand, the Allowances in the Type 1 Bundles. The Allowances in the Type 1 Bundles had an inherent value to the customer in and of themselves. It was what the customer wished to buy when he or she acquired the Type 1 Bundle and it was at that point that the relevant supply was made. The Allowances were not simply a “currency” to be used in securing future services the supply of which was the ultimate aim of the customer and the nature of which was unknown. The situation in this case was much closer to the facts in Marcandi, where the credits were the end, in and of themselves, and not part of a single indivisible economic supply leading to the sale of goods– see Marcandi at paragraphs [40] to [48].

In conclusion, in our view, the consideration payable for the Type 1 Bundles was chargeable to VAT at the point when the Type 1 Bundles were acquired and regardless of the extent to which the Allowances contained within the Type 1 Bundles were subsequently used.

There is one final point which we would make in relation to the Type 1 Bundles.

This is that the Allowances in a Type 1 Bundle are, in our view, completely different from the PAYG credits that are used as consideration for the Appellant’s other supplies. The latter are, to all intents and purposes, the same as the Points Rights in MRL and the credits in FMP. They are effectively a “currency” to be used in acquiring services at some future point. As such, their use is subject to the same variables as are set out in paragraph 113 above. It follows that we are not surprised that the VAT analysis in relation to the issue and utilisation of PAYG credits is markedly different from the VAT analysis in relation to the sale and use of the Type 1 Bundles. It is for that reason that, in our view, the question of fiscal neutrality, which was briefly mentioned in this context at the hearing, is misconceived. The purchase of PAYG credits to be applied at a later time in acquiring telecommunication services is nothing like the purchase of an immediate right to telecommunication services contained in a Plan Bundle.

Turning then to the Type 2 Bundles, we do not see how the fact that a customer was able to use the Allowances within a Type 2 Bundle to access either of the Subscription Services changes the analysis from the one set out above. This is because, as we have already noted in discussing the procedural propriety of admitting the Subscription Services in these proceedings in paragraph 39 above, the use of Allowances to access a Subscription Service was no different from the use of Allowances in the ordinary course. The consideration paid by the customer in order to have the right to access the relevant service is outside the scope of the appeals. In essence, both customers without Plan Bundles and customers with Plan Bundles were able to subscribe for the relevant Subscription Service. The only difference between them was that, whereas a customer without a Plan Bundle would then have to use his or her PAYG credits to pay for access to the relevant service, a customer with a Plan Bundle could access the relevant service by using the Allowances within his or her Plan Bundle. The nature of the Subscription Service itself was nothing to the point.

However, the same is not true of the fact that a customer who acquired a Type 2 Bundle had the right to access one or more of the VAS. That right was part of what the customer obtained in return for the consideration which he or she provided for the relevant bundle. Consequently, the availability of the VAS potentially affects the applicability to the Type 2 Bundles of the analysis set out above in relation to the Type 1 Bundles.

We would start our consideration of this question by noting that:

On the basis of all those factors, we have concluded that, from the viewpoint of the typical customer of the Appellant, the sale of each Type 2 Bundle should be treated for VAT purposes as a single composite supply of which the Allowances were the principal element and the VAS were ancillary to it because they were not an end in and of themselves but merely a means of better enjoying the Allowances. In particular in this regard:

For VAT purposes, the ancillary elements within a single composite supply share the same tax treatment as the principal element within that supply – see CPP at paragraph [30], Purple Parking at paragraphs [26] and [28] and Město at paragraph [28].

Consequently, at least so far as the sports update VAS and the IAT VAS are concerned, it is unnecessary to consider whether, had either of those two VAS been separate supplies, they would have amounted to supplies which were not supplies of telecommunication services. That is not something which we need to consider because, even if that were to be the case, the inclusion of the relevant VAS in the Type 2 Bundle would fall to be disregarded for VAT purposes on the grounds that they were ancillary to the predominant supply of telecommunication services. The sports update VAS and the IAT VAS were not separate supplies in their own right but were merely ancillary elements in a single composite supply of telecommunication services.

However, the non-EU Roaming Calls VAS raises a slightly different question in that that service is generically no different from the telecommunication service comprising the telephone call Allowances which were to be used within the UK. As such, even though the non-EU Roaming Calls VAS was an ancillary service, we do not see how that fact can override the “effective use and enjoyment” place of supply rule which was in place prior to 1 November 2017 in relation to telecommunication services.

It is very different from disregarding an ancillary service which, had it been a service in its own right, would have fallen into a different charging category – for example, zero-rated or exempt – from the principal telecommunication service for VAT purposes or even a different type of service from the telecommunication service albeit in the same charging category. To all intents and purposes, when the customer was using the non-EU Roaming Calls VAS, he or she was enjoying precisely the same service as when he or she was making use of the Allowances in the UK. It is just that he or she was doing so in a different location.

Thus, we think that, for a Type 2 Bundle which included the non-EU Roaming Calls VAS, the VAT treatment of the relevant Type 2 Bundle should follow the treatment described below in relation to Type 3 Bundles. We appreciate that, in reaching this conclusion, we are departing from the submission made by Ms Mitrophanous to the contrary effect but we do not see any basis for disregarding the place of supply rules in relation to part of what is effectively a single supply of telecommunication services simply because that part of the single supply was minimal or of no importance to the customer and was therefore ancillary.

Finally in relation to Issue One, we turn to the Type 3 Bundles. These differed from the Type 2 Bundles which included the non-EU Roaming Calls VAS in that:

The finding of fact mentioned in paragraph 128(3) above means that it is more difficult to regard Roam Like Home as being an ancillary element in a single complex supply than it is to regard the non-EU Roaming Calls VAS in that way. However, given the conclusion that we have reached in paragraphs 125 to 127 above, to the effect that, even if a right effectively to use and enjoy a telecommunication service in a country outside the EU is ancillary, the exercise of that right must still be taken into account for VAT purposes and cannot simply be treated for VAT purposes as being subsumed within the principal service, there is no need for us to consider whether Roam Like Home should be distinguished from the non-EU Roaming Calls VAS on the basis that it was an end in and of itself and not merely a means of better enjoying the Allowances and therefore not ancillary. As we have said, regardless of whether or not the right effectively to use and enjoy a telecommunication service in a country outside the EU is ancillary, it is necessary to give effect to the exercise of that right in determining the VAT consequences of the relevant supply.

Proceeding on that basis, and turning to the supplies themselves, supplies of Type 3 Bundles made on or after 1 November 2017 should be treated in precisely the same manner as supplies of Type 1 Bundles because the use of Allowances within a non-EU country on and after that date did not change the place in which the supply comprising the sale of the relevant Type 3 Bundle was treated as being made. That place of supply was the UK for the reasons set out in relation to Type 1 Bundles in paragraph 112 above.

However, in relation to supplies of Type 3 Bundles made prior to 1 November 2017, the “effective use and enjoyment” rule in paragraph 8 of Schedule 4A to the VATA applied. The Upper Tribunal held in Telefonica at paragraphs [52] to [54] that a telecommunication customer had effective use and enjoyment of a telecommunication network for the purposes of paragraph 8 of Schedule 4A to the VATA only to the extent that he or she actually accessed the network to make or receive telephone calls or send or receive text messages or data and did not do so merely by having the ability to take advantage of that facility. (In that sense, the application of the “effective use and enjoyment” rule differs from the application of the general rules governing the time at which supplies are made, as discussed in the context of the Type 1 Bundles in paragraphs 97 to 118 above.) It means that the “effective use and enjoyment” rule would make no difference to the VAT treatment applicable to a Type 3 Bundle supplied prior to 1 November 2017 where the relevant customer did not actually use the Type 3 Bundle to make a telephone call, send a text message or access data from within a non-EU country.

However, it is necessary to consider how, in circumstances where a customer did actually use the Type 3 Bundle to access the network from within a relevant non-EU country prior to 1 November 2017, the “effective use and enjoyment” rule might change the analysis set out above in relation to the Type 1 Bundles. We have found this to be a difficult question but we have ultimately concluded that the Respondents are right in saying that not only does the very existence of the “effective use and enjoyment” rule shed no light on the general question as to the nature and timing of supply which we are addressing in relation to Issue One (as suggested by Mr Rivett (in paragraph 92 above)) but also that that rule did not prevent the whole of the consideration paid for a Type 3 Bundle from being subject to VAT in the same way as consideration paid for a Type 1 Bundle (because the supply of services comprising the sale of the Type 3 Bundle was made in the UK) but with a retrospective adjustment to that VAT to the extent (if any) that the Allowances within the Type 3 Bundle were effectively used and enjoyed within a relevant non-EU country.

We say that notwithstanding the objections raised to that conclusion by Mr Rivett as outlined in paragraph 92 above.

Before explaining the reasons why we have reached that conclusion, we should say that it was common ground before us that there was no legislative basis within either the PVD or the VATA for any of the VAT chargeable in respect of a supply of a telecommunication service to be repaid following the time of supply to reflect the effective use and enjoyment of that service in a non-EU country following its time of supply. We will therefore proceed on the assumption that was the case. However, we should record in passing that it is not immediately obvious to us why no such right to repayment would have arisen under Article 59a of the PVD and Section 80 of the VATA in those circumstances. That is because, in that case, the taxpayer would have accounted for VAT in respect of the relevant supply on the basis that it was made in the UK because that is where the supplier or the customer (as the case may be) belonged and then subsequently discovered that, contrary to its initial assumption, the place of that supply was in fact outside the EU and that therefore no VAT was due in respect of the supply. We are not sure why that would not bring the terms of Article 59a of the PVD and Section 80(1) of the VATA into play retrospectively.

Be that as it may, in the rest of this section of our decision, we will proceed on the assumption that both parties are correct in this respect and that there was no express provision within either the PVD or the VATA entitling the Appellant to make a claim for repayment to reflect the effective use and enjoyment of the relevant telecommunication service following the time of supply.

We accept that, on the basis of that assumption, the absence of any such provision in the legislation for a retrospective adjustment might be taken to support the proposition that the time of supply of a telecommunication service could never be made until the relevant service was effectively used and enjoyed. We also recognise that:

However, there are a number of reasons why we believe that, even if the legislation contained no express provision for an adjustment to be made following the time of supply, the conclusion we have set out in paragraph 132 above is the right one. Those are as follows:

For the above reasons, we have concluded that the Respondents are correct in saying that the Type 3 Bundles should be treated for VAT purposes in the same way as the Type 1 Bundles save only for the retrospective adjustment to the VAT payable in relation to Type 3 Bundles sold before 1 November 2017 for effective use and enjoyment of the relevant Allowances in a relevant non-EU country.

For completeness, we would add that, contrary to what was suggested by the FTT in H3G at paragraph [256], we are not convinced that the decision in Telefonica sheds much light on this question. In the first place, the matter in dispute in that case was the lawfulness (or otherwise) of the methodology which the Respondents had suggested should apply in calculating the proportion of the taxpayer’s line rental revenues that should not give rise to VAT because it could be attributed to the effective use and enjoyment of the taxpayer’s services in non-EU countries by its customers. As such, the present question was not something which the Upper Tribunal in that case was directly considering.

Even more significantly, it is by no means clear from the facts in Telefonica that the Respondents’ methodology which was in issue in that case did involve an adjustment made after the time that the relevant supplies were made to the VAT arising in respect of the relevant supplies. The Respondents’ methodology which was in issue in the case related to the extent to which line rentals that were payable monthly in arrear should give rise to VAT and that methodology depended on the actual use of the network from non-EU countries over the month in question. Whilst reference was made in the decision to the fact that the methodology previously used by the taxpayer involved accounting for VAT on an estimated basis and then adjusting that amount in the following accounting period, we do not see that the same retrospectivity was necessarily a feature of the Respondents’ methodology and it was that methodology which was in issue in the case.

No provision was made in the PVD in relation to vouchers issued prior to 1 January 2019.

However, as a matter of UK domestic law, Schedule 10A of the VATA (“Schedule 10A”) contained the following relevant provisions in relation to vouchers issued prior to that date:

References in this Schedule to the “face value” of a voucher are to the amount referred to in sub-paragraph (1) above.

is a person from whom goods or services may be obtained by the use of the voucher, and

if there are other such persons, undertakes to give complete or partial reimbursement to those from whom goods or services are so obtained.

The consideration for the issue of a retailer voucher shall be disregarded for the purposes of this Act except to the extent (if any) that it exceeds the face value of the voucher.…

For the purposes of this Schedule–

the rate categories of supplies are–

supplies chargeable at the rate in force under section 2(1) (standard rate),

exempt supplies and other supplies that are not taxable supplies.;

the “non-standard rate categories” of supplies are those in sub-paragraphs …. (iv) of paragraph (a) above;

goods or services are in a particular rate category if a supply of those goods or services falls in that category”.

In 2016, the Voucher Directive was enacted in order to ensure a consistency of treatment across the EU in relation to transactions involving vouchers. Amongst other things, it sought to identify what constituted vouchers (as distinct from payment instruments) for VAT purposes and to ensure that, in relation to multi-purpose vouchers, VAT should be charged only when the goods or services to which the voucher related were supplied and that consideration received for the issue of a voucher should not give rise to VAT to the extent that the voucher remained unused.

Article 2(1) of the Voucher Directive amended the PVD by inserting new Articles 30a, 30b and 73a in relation to vouchers issued on or after 1 January 2019.

Article 30a provided as follows:

‘voucher’ means an instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services and where the goods or services to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument;

‘single-purpose voucher’ means a voucher where the place of supply of the goods or services to which the voucher relates, and the VAT due on those goods or services, are known at the time of issue of the voucher;

‘multi-purpose voucher’ means a voucher, other than a single-purpose voucher.”

Article 30b provided as follows:

Each transfer of a single-purpose voucher made by a taxable person acting in his own name shall be regarded as a supply of the goods or services to which the voucher relates. The actual handing over of the goods or the actual provision of the services in return for a single-purpose voucher accepted as consideration or part consideration by the supplier shall not be regarded as an independent transaction.

The actual handing over of the goods or the actual provision of the services in return for a multi-purpose voucher accepted as consideration or part consideration by the supplier shall be subject to VAT pursuant to Article 2, whereas each preceding transfer of that multi-purpose voucher shall not be subject to VAT.

Article 73a provided as follows:

In order to reflect the amendments to the PVD which were made by the Voucher Directive, the VATA was amended by the introduction of Schedule 10B of the VATA (“Schedule 10B”) in relation to vouchers issued on or after 1 January 2019. The relevant provisions of Schedule 10B are as follows:

We were referred to a number of cases in relation to vouchers in the course of the hearing. Those are described briefly below.

In Leisure Pass Group Limited v The Commissioners for Her Majesty’s Revenue and Customs [2008] EWHC 2158 (Ch) (“Leisure Pass 1”), the taxpayer sold a pass which entitled the holder, during the period of the pass’s validity, to enter without further payment a number of attractions in London. A particular attraction could be visited only once during the life of the pass. Sir Andrew Park held that the pass was not a face-value voucher for the purposes of Schedule 10A because it did not contain a monetary limit which could be exhausted by the use of the voucher. Although the pass was a voucher which represented the right to receive services, it did not do so “to the value of an amount recorded on it”.

By the time of Leisure Pass Group Limited (No 2) v The Commissioners for Her Majesty’s Revenue and Customs (2009) VAT Decision 20910 (“Leisure Pass 2”), the terms of the pass had been changed so that it contained a set value shown on the face of the pass itself. That value was then reduced on each occasion that the passholder gained entry to one of the attractions. The VAT Tribunal considered that, in that case, the pass did represent the right to receive services “to the value of an amount recorded on it” and therefore qualified as a face-value voucher for the purposes of Schedule 10A.

In Skyview Ballooning v The Commissioners for Her Majesty’s Revenue and Customs [2014] UKFTT 032 (TC) (“Skyview Ballooning”), the taxpayer provided hot air balloon rides. It also sold merchandise such as children’s T-shirts, mugs and other souvenirs. The taxpayer sold vouchers which could be redeemed for a hot air balloon ride or any of the merchandise. The cash value of the voucher was not shown on the face of the voucher but the voucher did set out its expiry date and a code number and, at the bottom of the voucher, a note stated that the cash value of the voucher was individually recorded by the supplier and could be obtained by writing to the supplier’s office. The FTT held that the vouchers satisfied the conditions in paragraph 1 of Schedule 10A and were not precluded from falling within the ambit of the schedule by being “single purpose vouchers”. As regards the requirement that the amount of the voucher be stated on, or recorded in, the voucher, the FTT held that the fact that the voucher in that case set out a code which enabled the holder of the voucher to access the system on the supplier’s computer in order to check on the balance on the voucher from time to time meant that the relevant language was satisfied. The FTT added that that was implicit from the fact that the legislation allowed for vouchers in electronic form – see Skyview Ballooning at paragraphs [22] to [25].

In Skatteverket v DSAB Destination Stockholm AB (Case C – 637/20) (“Stockholm”), the taxpayer sold a card granting admission to various attractions in Stockholm for a limited period of time and up to a certain value, together with unlimited access to transport services during the term of the card. The services included in the card were either subject to tax, at various rates, or exempt. The CJEU held that:

In FMP, the CS considered the question of whether the credits purchased by customers were face-value vouchers falling within Schedule 10A although its observations on the subject were obiter because it had already found for the taxpayer that, on general VAT principles, there was no supply unless and until the credits were used in viewing or downloading documents.

On the facts in the case, the CS concluded that the credits acquired by a customer were not a token, stamp or voucher in electronic form representing a right to services, as required by paragraph 1 of Schedule 10A. This was because:

In addition:

Finally, the CS observed at paragraph [62] that the uncertainty in the ultimate value of the credits when they were going to be redeemed – which was an important factor in the CS’s conclusion that the prepayment provisions of Section 6(4) of the VATA did not apply to the facts in that case – also had the effect of precluding the credits from satisfying the requirements in paragraph 1 of Schedule 10A, as noted in paragraph 156 above.

In H3G, the FTT held that:

Whilst that was sufficient to mean that the taxpayer failed on this point, there was another reason why the taxpayer could not rely on the voucher rules and that was that, if there were vouchers, they did not “represent… a right to receive …services to the value of an amount stated on [them] or recorded on [them]”. This was because:

As regards the position prior to 1 January 2019, Mr Rivett explained that paragraph 1 of Schedule 10A set out the following requirements for the Plan Bundles to constitute face-value vouchers for the purposes of that schedule:

He went on to explain how the Plan Bundles met each of the above conditions as follows:

Since the Plan Bundles were face-value vouchers, it was then necessary to address what category of face-value vouchers they were. In this case, the Plan Bundles were “retailer vouchers” for the purposes of the schedule because they were issued by the person who was to provide the services to be obtained on the use of the Plan Bundles (see paragraph 4(1) of Schedule 10A). Accordingly, the consideration received for the Plan Bundles was to be disregarded except to the extent that it exceeded the face-value of the voucher (which it did not) (see paragraph 4(2) of Schedule 10A).

Paragraph 7A of Schedule 10A, which excluded single-purpose vouchers, did not apply to the Plan Bundles because the Plan Bundles represented the right to receive services of different types which were not subject to a single rate of VAT. In particular, the supply of a telecommunication service could either be standard-rated or not subject to VAT because the place of its supply was outside the UK (see paragraph 8 of Schedule 10A).

As regards the position on and after 1 January 2019, Mr Rivett explained that paragraph 1 of Schedule 10B set out the following requirements for the Plan Bundles to constitute vouchers for the purposes of that schedule:

He went on to explain how the Plan Bundles met each of the above conditions as follows:

The only differences between the entitlements under the Plan Bundles and PAYG credits was that the latter were defined by reference to monetary amounts whereas the former were (at least primarily) defined by reference to the Allowances and that difference was irrelevant in the context of Article 30a of the PVD and Schedule 10B.

The Plan Bundles were not “single purpose vouchers” (within the meaning of paragraph 4 of Schedule 10B) for the purposes of the schedule because, at the time when a Plan Bundle was sold, the place of supply of the services to which the entitlements related was not known and the services to be supplied pursuant to those entitlements did not all fall within a single supply category. Accordingly, the Plan Bundles were “multi-purpose vouchers” (as defined in paragraph 6 of Schedule 10B) for the purposes of the schedule and therefore the sale of the Plan Bundles (which was the issue of the instrument) was not chargeable to VAT and no VAT arose until the services to which the entitlements related were supplied (pursuant to paragraphs 7 and 8 of Schedule 10B).

The Appellant recognised that a different analysis might apply to Plan Bundles which carried an entitlement to an unlimited amount of a particular category of Allowances. That was because such category of Allowances was not a fixed number of tokens but allowed for unlimited use within a specified period. In such a case, as long as there was some usage of the relevant category of Allowances, the whole amount paid for the Plan Bundle (or, if the Plan Bundle included more than one category of Allowances, the portion of the amount paid for the Plan Bundle which was attributable to the unlimited category of Allowances) should be treated as consideration for the services supplied and, if the services supplied fell into different VAT rates, then there would have to be an apportionment.

We will deal with the position in relation to the voucher legislation relatively briefly. Again, we have not set out the submissions of Ms Mitrophanous because we agree with her conclusion that the VAT analysis in the present case is not affected by the voucher legislation.

In relation to the position prior to 1 January 2019, we should note as a starting point that it is unclear to us whether the Appellant was claiming that:

The FTT in H3G had a similar difficulty in relation to the allowances in that case – see paragraph 158 above. However, we do not think that it ultimately makes any difference which of those it was because whichever of them is alleged to be the relevant voucher in this case suffers from the same defect in terms of Schedule 10A. That defect is that the entitlements under the Plan Bundles which were shown on the Appellant’s system were not a monetary amount to be used in purchasing future services but were instead entitlements to Allowances (which is to say something other than a monetary amount) that could be used from time to time while the Plan Bundle remained valid.

The critical part of Schedule 10A in this respect is condition 3 – the requirement in paragraph 1 of the schedule to the effect that the right to receive services represented by the voucher needed to be “to the value of an amount”, which is to say, limited by reference to a monetary value. No such amount was recorded in the case of a Plan Bundle. Instead, the customer’s entitlement to future services under the Plan Bundle was expressed in terms of remaining available Allowances. Thus, we do not agree with Mr Rivett’s submission to the effect that each Plan Bundle had a monetary value which was reduced through usage and could be exhausted. On the contrary, the Plan Bundle may have been sold for a monetary amount at inception but thereafter it carried an entitlement to Allowances and it was those Allowances, and not a monetary amount, which were reduced through usage and could be exhausted. The position in this respect is wholly unlike the position in relation to PAYG credits, despite Mr Rivett’s attempt to present the 2 situations as indistinguishable.

The mere fact that it might have been possible to do a calculation and convert the Allowances which remained from time to time into a monetary amount is insufficient – see Park J in Leisure Pass 1 at paragraphs [15] to [18]. In this case, as in Leisure Pass 1, the limits on the use of the entitlements were not monetary limits and the mere fact that it might have been possible to express the entitlements which remained from time to time in monetary terms is insufficient. As Park J succinctly put it in Leisure Pass 1 at paragraph [18], “[the] London Pass never expires because the holder has exhausted the monetary amount of it”. Precisely the same can be said in this case about the entitlements under the Plan Bundles in this case.

In any event, even if it were possible to express the entitlements which remained from time to time in monetary terms, any monetary amount so calculated was not shown on the Appellant’s system and therefore condition 4 was not satisfied, even after taking into account the extended meaning of the term “stated on it or recorded in it” applied by the FTT in Skyview Ballooning.

We would add that:

The simple fact is that the entitlements under the Plan Bundles were not monetary amounts which 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.

For the reasons set out above, we have concluded that the entitlements under the Plan Bundles did not satisfy any of condition 2, condition 3 or condition 4 as described in paragraph 160 above and therefore that the Plan Bundles did not fall to be treated as vouchers for the purposes of Schedule 10A.

A similar problem arises in the case of the legislation in Schedule 10B because both the second condition and the third condition in that legislation – and the equivalent language in the PVD – refer to an obligation on the part of the relevant supplier or suppliers to accept the instrument comprising the voucher as consideration for the provision of goods or services. It is difficult to see how the use of the entitlements contained within a Plan Bundle can properly be described as involving the acceptance by the Appellant of an instrument as consideration for services. That language is clearly directed at the classic example of a voucher such as a book token which is presented for payment when services or goods are being acquired with the voucher. In that case:

In our view, the use by a customer of entitlements which he or she has acquired on the purchase of a Plan Bundle cannot be said to involve an acceptance by the Appellant of the Plan Bundle as consideration for the services reflecting those entitlements without an unacceptable level of intellectual gymnastics. The entitlements under the Plan Bundle required the Appellant to provide services but to describe the exercise of those entitlements as involving the acceptance by the Appellant of the Plan Bundle as consideration for those services would be a misnomer.

We would add that we have some reservations too about the ability of the Plan Bundles to meet the first condition.

As regards that condition, we are not persuaded that a Plan Bundle can properly be described as an “instrument”. It would not naturally fall within the meaning of that word and we were not persuaded that the European Commission’s statement set out in paragraph 165(1) above advanced the Appellant’s case on that front. The “prepaid telecommunications credits” to which the European Commission referred in that statement clearly related to pay as you go or top up credits such as the PAYG credits utilisable by customers of the Appellant who did not have Plan Bundles. There is a significant difference between a PAYG credit and an entitlement under a Plan Bundle in that the former was a monetary amount which could be used to acquire telecommunication services at the applicable rate at the time when they were used and were consequently reduced. It is not hard to see why the use of PAYG credits in that manner should be treated as the acceptance by the Appellant of an instrument as consideration for the provision of the telecommunication service in question. The use of the PAYG credits was not very different from the use of the visitor card in Stockholm. However, that is a far cry from the performance by the Appellant of its contractual obligation to enable the relevant customer to use the entitlements under the Plan Bundles which the customer had already acquired.

Finally, we would note that, even if we are wrong in relation to the above, and the Plan Bundles did constitute vouchers for the purposes of Schedule 10B, they would have been single purpose vouchers as defined in paragraph 4 of Schedule 10B. This is because, once the sports update VAS and the IAT VAS are disregarded by virtue of having been ancillary elements in a single composite supply of telecommunication services, all of the services supplied pursuant to the Plan Bundles fell within the same supply category (telecommunication services) and all of those services were supplied in the UK (because, by 1 January 2019, the “effective use and enjoyment” rule was no longer applicable and therefore the fact that the customer belonged in the UK determined that the place of supply of those services was the UK).

For the reasons set out above, we have concluded that the Plan Bundles did not fall to be treated as vouchers for the purposes of Schedule 10B and that, even if they were, they would not have been multi-purpose vouchers.

In conclusion, our views on the matters of principle that have been raised with us are as follows:

It is now a matter for the parties to seek to agree on the other issues which are outstanding in the appeals – the question of best judgment and matters of quantum. Should they be unable to reach agreement on those matters in the light of this decision in principle, then a further hearing will be required in order to resolve them.

For completeness, we should say that we have, throughout this decision, proceeded on the basis that, in terms of the time of supply of a Plan Bundle, no distinction should be drawn between:

Our understanding is that, contrary to that statement, in at least some cases, a Plan Bundle may well have been made available to the customer, and payment for the Plan Bundle may well have been made, before the Plan Bundle was activated. However, insofar as that is the case, we propose to leave the implications of that difference to be resolved in the first instance by the parties when they seek to agree quantum. We will address it, if necessary, at any subsequent hearing.

Finally, it would be remiss of us not to conclude this decision by thanking Ms Mitrophanous and Mr Rivett (in the latter case ably assisted by Mr Ripley) for the clarity and helpfulness of their submissions throughout the hearing. The issues which we have been asked to address in this decision are complex and we are grateful for the help that they provided in enabling us to deal with them.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

During the period relevant to the appeals, the relevant legislation in relation to Issue One was as follows.

Article 2 of the PVD provided that “the supply of services for consideration within the territory of a Member State by a taxable person acting as such” would be subject to VAT.

As regards the time at which a supply of services was made for VAT purposes, the position as a matter of EU law was governed by the following provisions of the PVD:

The above provisions were reflected in the following provisions of the VATA:

As regards the place at which a supply of telecommunication and electronically supplied services was made for VAT purposes, the position as a matter of EU law changed over time.

In the period prior to 1 January 2015, the position was governed by Articles 45 and 59a of the PVD. Article 45 of the PVD set out the general rule that a supply of services to a non-taxable person was the place where the supplier had established his business or, if the supplies were made from a fixed establishment of the supplier other than that establishment, from that fixed establishment and, in the absence of any place of establishment or fixed establishment, from the place where the supplier had his permanent address or usually resided. However, this was subject to Article 59a of the PVD, which, so far as relevant, provided that:

consider the place of supply of any or all of those services, if situated within their territory, as being situated outside the Community if the effective use and enjoyment of the services takes place outside the Community …”.

From 1 January 2015, the position in relation to telecommunication services was governed by Articles 58 and 59a of the PVD.

Article 58 of the PVD provided as follows:

telecommunications services…”

However, this was subject to the terms of Article 59a of the PVD, which, so far as relevant, provided as follows:

consider the place of supply of any or all of those services, if situated within their territory, as being situated outside the Community if the effective use and enjoyment of the services takes place outside the Community …”.

As a matter of UK domestic law, Section 7A of the VATA provided that:

However, the rule in Section 7A(2) of the VATA was subject to the provisions of Schedule 4A to the VATA, which contained special rules in relation to certain types of services, including telecommunication services.

In the period prior to 1 January 2015, paragraph 8 of Schedule 4A to the VATA provided that, where a supply of telecommunication services would otherwise be treated as made in the UK and the services were to any extent effectively used and enjoyed in a country which was not in the EU, then the supply would be treated as being made to that extent in that country.

In the period on and after 1 January 2015 to but excluding 1 November 2017, paragraph 8 of Schedule 4A to the VATA continued to have the same effect but paragraph 15 of Schedule 4A to the VATA was amended to provide that, subject to the provisions of paragraph 8, a supply of telecommunication services to a person who was not a “relevant business person” was to be treated as being made in the country where the recipient belonged.

The effect of the legislation set out above was that, prior to 1 November 2017 a supply of telecommunication services by a supplier belonging in the UK (such as the Appellant) to a private individual belonging in the UK (such as the customers in the present case) were to be treated as being made in the UK except to the extent that the telecommunication services were effectively used and enjoyed outside the EU.

In the period on and after 1 November 2017, paragraph 8 to Schedule 4A to the VATA no longer extended to telecommunication services. Instead, paragraph 9E of Schedule 4A to the VATA set out similar “effective use and enjoyment” rules to those which had applied to supplies of telecommunication services in paragraph 8 but did so only in relation to supplies to a “relevant business person” and not supplies to a private person. Thus, supplies of telecommunication services to a private person on or after 1 November 2017 were treated by paragraph 15 of Schedule 4A to the VATA as being made in the country where the recipient belonged.