Lyca Mobile Loses £51 Million VAT Appeal Over Plan Bundle Pricing Dispute

The First Tier Tribunal rules against Lyca Mobile, determining VAT was due at the point of sale for voice, text, and data bundles.

Lyca Mobile has lost a significant £51 million VAT appeal regarding the sale of its voice, text, and data bundles spanning from 2012 to 2019. The First Tier Tribunal Tax Chamber's 55-page judgment dismissed Lyca’s argument that VAT should only be applied when the bundled services were utilized.

Lyca Mobile had argued that its Plan Bundles should be classified as face-value vouchers, thus VAT would only be due when the services within the bundles were actually used. The company resisted that these bundles functioned similarly to top-up credits, with VAT applicable only at the point of service delivery. The VAT was payable at the point of sale, even though HM Revenue & Customs (HMRC) disagreed.

The disputed VAT amounts covered three periods: £6.3 million for 2012-2015, £19.1 million for 2015-2017, and £25.7 million for 2019. The Tribunal ruled that the entitlements under the Plan Bundles were not future services but represented services already provided.

Judge Tony Beare explained that the Plan Bundles did not qualify as vouchers for future services but as products of services already delivered, thus requiring VAT at the time of sale. This ruling emphasizes the need for clear VAT applications on bundled services.