Lebara confident in Euro court battle with HMRC over VAT

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Ethnic MVNO has high hopes it will win European Court of Justice ruling in disagreement with HMRC over non-payments for its European and UK calling cards

Lebara says it is hopeful the European Court of Justice (ECJ) will rule in its favour over a dispute with HMRC surrounding non-payment of VAT for its European and UK calling cards.

HMRC claims Lebara should pay it VAT each time a calling card is sold to a distribution partner as well as when a customer activates the card in any of its European markets.

It claims that because Lebara is based in the UK and handles all calls made using the cards from its operations facility in London that both earnings should be
subject to VAT charges.

Lebara disputes this, stating that under UK law the sale of such items is defined as right to receive telecomms services and is not a taxable product.

Lebara cited Schedule 10A of the Value Added Tax Act 1994 in its claim, which states “the issue of a retail voucher shall be disregarded for the purposes of this act”.

It also says should HMRC charge it for the activation of each calling card, VAT would have been paid twice on a single item, which is illegal under EU law.

HMRC, however, claims the Value Added Tax Act does not contain any provision dealing with redemption, meaning any service supplied by Lebara to a customer is taxable.

The case was originally heard at the ECJ in Luxembourg on October 13 last year and a decision is expected sometime between March and June.

The advocate general of the European Court of Justice Niilo Jääskinen has since written a recommendation that states Lebara should only make a single taxable payment when selling the cards on to its distribution partners.

Lebara CEO Ratheesan Yoganathan said: “The advocate general has given his opinion which is in favour of us. I would like to think we are confident of winning this case and if we weren’t we wouldn’t have gone all the way to the ECJ in the first place.”

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