Lebara comes out top in VAT battle with HMRC


European Court of Justice rules in favour of MVNO which fought attempt to make it pay VAT twice on international calling cards

The European Court of Justice has sided with MVNO Lebara in a dispute with Her Majesty’s Revenue and Customs (HMRC) over whether the operator should have to pay VAT twice, both when it sold international calling cards to distributors and when end users activated the cards.

HMRC argued that Lebara should pay VAT in the UK each time a customer in Europe activated a card, because the service was being delivered from London, as well as when selling cards to distributors from the UK.

However, the ECJ ruled in favour of Lebara, saying that the MVNO was only engaged in one sales relationship with its distributors, who are in turn responsible for the relationship with end users.

Grant Thornton UK LLP head of indirect tax Lorraine Parkin said: “The judgment is good news for Lebara and other mobile operators.

“This is a significant decision with substantial amounts of tax at stake.

“HMRC’s stance on this issue has always been somewhat illogical, as it would mean that the same supply can be taxable in two member States.

“The Court’s judgment today provides welcome clarity and will hopefully lead to a more consistent application of the rules by the tax authorities in the EU.”