Weekly VAT News

Lycamobile UK Limited: VAT treatment of plan bundles – UT

Lycamobile UK Limited sold ‘plan bundles’ to UK customers, comprising rights to access telecommunication services, that is, telephone calls, text messages, and data. Lycamobile considered that for VAT purposes services within plan bundles were only supplied as and when the services were used. HMRC assessed Lycamobile on the basis that VAT was due when the customer purchased a plan bundle, irrespective of when, if ever, the services were used. In July 2024, the First-tier Tribunal agreed with HMRC, subject to a potential adjustment for non-EU roaming charges pre-1 November 2017 (when supplies of business-to-consumer telecommunication services were not subject to UK VAT to the extent they were effectively used and enjoyed outside the European Union). The Upper Tribunal has upheld the FTT decision. The UT considered the “simple question” at the heart of the appeal was whether Lycamobile was making a supply of services consisting of the allowances included in a bundle when the bundle was sold, or only making supplies when and to the extent those allowances were used. The UT concluded that the FTT correctly applied the law “and reached the right conclusion on this issue”. The UT also agreed with the FTT that ‘value added services’ included with certain bundles were not separate supplies, but ancillary to a single composite supply of telecommunication services. The UT also upheld the FTT’s finding that plan bundles were not vouchers, so the VAT rules relating to vouchers did not apply. The UT dismissed Lycamobile’s appeal. The UT also dismissed HMRC’s cross-appeal, concerning the requirement to make an adjustment for non-EU use and enjoyment. (HMRC had argued that the ancillary elements of a supply cannot play a role in determining any aspect of the supply’s VAT treatment.) (Contact: Nicole Brook)

Vaping products duty

Vaping products duty (VPD) will come into effect on 1 October 2026, at the rate of £2.20 per 10 ml of vaping liquid. The new excise duty, the legislation for which is included in Part 4 of Finance (No. 2) Bill 2024-2026, will be charged on vaping products manufactured in, or imported into, the UK. At the same time, a vaping duty stamps (VDS) scheme will be introduced to mandate stamping of vaping products manufactured in, or imported into, the UK, extending to all vaping products made available for sale in the UK from 1 April 2027. Registration for VPD and the VDS scheme will open on 1 April 2026. HMRC have published a stakeholder communications pack, with support materials for trade associations, industry groups, representative bodies, and other organisations, with the intention of helping businesses understand and prepare for the new regime. The pack includes emails, social media posts, leaflets, newsletters, and key messages for various audience groups. (Contact: Donna Hemphill)

EU: Customs duty on low value imports

As covered in a previous edition of WVN, the EU is to abolish the rule that customs duties do not apply to low value goods (less than €150) entering the EU, and impose a fixed customs duty of €3 from 1 July 2026, until the development of the EU’s proposed customs data hub, which will enable customs duty to apply to all imported goods, regardless of value. The duty will apply to goods entering the EU through the import one-stop shop (IOSS) scheme and goods in postal consignments. The Common Customs Tariff will apply to operators not registered for the IOSS scheme. The regulation bringing the duty into effect was published in the Official Journal of the European Union on 18 February 2026. The regulation also includes a requirement for the European Commission to monitor whether the new regime results in a diversion of trade flows, in particular from the IOSS scheme, and to review progress in developing the customs data hub, to assess whether it will be operational by 1 July 2028, as intended. (Contact: Sam Kiely)

This week’s CJEU VAT calendar

On 25 February, there will be judgments in Digipolis on whether VAT applied to services supplied by a joint venture to its members, and in Finanzamt Osterreich on whether there was double taxation of intra-EU acquisitions. There will also be an Advocate General opinion in Veronsaajien oikeudenvalvontayksikko on the management of credit.

Dbriefs webcast

On Thursday, 26 February at 12.00, there will be a webcast on EU CBAM: key requirements in the definitive period. The definitive period for the EU carbon border adjustment mechanism is in full effect as of 1 January 2026, reshaping the landscape for businesses importing into the EU, and with implications for non-EU manufacturers of CBAM goods. Our Deloitte panel will discuss the implications of CBAM for EU and non-EU businesses, the December 2025 package of legislative measures relating to CBAM’s implementation, and future CBAM developments.