TalkTalk Telecom Ltd v HMRC [2023] UKFTT 12 (TC) (see also page 7) concerns the pre-2014 prompt payment discount legislation. HMRC disagreed both as to the meaning of the prompt payment discount legislation, and also as to the contractual effect of the way the discount was offered.
A dispute ensued, with references to Pepper v Hart [1993] AC 593, as well as statutory and contractual construction. All the good stuff!
But first, the legal provision in dispute: VATA 1994 Sch 6 para 4(1), which states:
‘Where goods or services are supplied for a consideration in money and on terms allowing a discount for prompt payment, the consideration shall be taken for the purposes of section 19 as reduced by the discount, whether or not payment is made in accordance with those terms.’
Paragraph 4(1) has been considered at least twice before: in Saga Holidays Ltd v HMRC [2003] VTD 18591 and in Virgin Media v HMRC [2018] UKFTT 56 (TC).
In Saga, the tribunal concluded that para 4(1) only applied where a discount was realised by the recipient, although it did for linguistics what Victor Frankenstein did for biology. The tribunal in Virgin concluded that the language was plain: where terms allow for a discount, the VATable consideration is the discounted price regardless of what actually happens.
Neither prior decision was binding in TalkTalk’s case.
The conflicting decisions might suggest sufficient that the first test in Pepper v Hart was met; however, the tribunal did not think so. It concluded that the Virgin decision was correct, and the meaning was plain: the value of the supply is the discounted value, provided that the discount is a term of the contract.
The tribunal made independent reference to Pepper v Hart, noting that neither party had referred to it, and concluded that the Hansard extract was inadmissible. That may be because the taxpayer relied on it for interpreting the previous iteration of the legislation, and then relied on the meaning of the previous legislation to clarify the later legislation, whereas HMRC said that the previous legislation was irrelevant. I wonder if the tribunal would have taken the same view if the provision had been genuinely ambiguous.
What, then, of the contractual analysis? The ‘speedy payment discount’ (SPD) was not in the standard terms & conditions (T&Cs). It was mentioned on bills and in emails notifying customers of bills. Details of the SPD were set out on a separate web page to the general T&Cs. The T&Cs did allow for unilateral changes by TalkTalk, by publication on its website.
TalkTalk argued that it had amended its T&Cs by publishing the SPD details on its website. HMRC argued that the SPD page made no reference to the T&Cs, and that the SPD was a separate process.
The tribunal concluded that:
the general T&Cs had not been amended;
the SPD was a rolling offer of a discount on a month by month basis;
services billing in advance were supplied when paid for; and
the variation of contract, payment and supply all happened simultaneously, so the supply was not made on terms allowing for a prompt payment discount.
Put differently, TalkTalk won the technical argument, but lost the appeal because of the way the paperwork was structured.
There is £10m at stake, and both sides deployed heavy artillery in their legal teams, so an appeal seems likely. Expect it to focus on what the Supreme Court really meant about the interaction between contractual documents and commercial and economic reality in Secret Hotels2 v HMRC [2014] UKSC 16. It seems fair for TalkTalk to argue that the SPD was an open offer to all relevant customers, and that the phrase ‘on terms’ in para 4(1) should apply more widely than just the T&Cs.
Home >Articles > TalkTalk Telecom: VAT and discounts for prompt payment
TalkTalk Telecom: VAT and discounts for prompt payment
TalkTalk Telecom Ltd v HMRC [2023] UKFTT 12 (TC) (see also page 7) concerns the pre-2014 prompt payment discount legislation. HMRC disagreed both as to the meaning of the prompt payment discount legislation, and also as to the contractual effect of the way the discount was offered.
A dispute ensued, with references to Pepper v Hart [1993] AC 593, as well as statutory and contractual construction. All the good stuff!
But first, the legal provision in dispute: VATA 1994 Sch 6 para 4(1), which states:
‘Where goods or services are supplied for a consideration in money and on terms allowing a discount for prompt payment, the consideration shall be taken for the purposes of section 19 as reduced by the discount, whether or not payment is made in accordance with those terms.’
Paragraph 4(1) has been considered at least twice before: in Saga Holidays Ltd v HMRC [2003] VTD 18591 and in Virgin Media v HMRC [2018] UKFTT 56 (TC).
In Saga, the tribunal concluded that para 4(1) only applied where a discount was realised by the recipient, although it did for linguistics what Victor Frankenstein did for biology. The tribunal in Virgin concluded that the language was plain: where terms allow for a discount, the VATable consideration is the discounted price regardless of what actually happens.
Neither prior decision was binding in TalkTalk’s case.
The conflicting decisions might suggest sufficient that the first test in Pepper v Hart was met; however, the tribunal did not think so. It concluded that the Virgin decision was correct, and the meaning was plain: the value of the supply is the discounted value, provided that the discount is a term of the contract.
The tribunal made independent reference to Pepper v Hart, noting that neither party had referred to it, and concluded that the Hansard extract was inadmissible. That may be because the taxpayer relied on it for interpreting the previous iteration of the legislation, and then relied on the meaning of the previous legislation to clarify the later legislation, whereas HMRC said that the previous legislation was irrelevant. I wonder if the tribunal would have taken the same view if the provision had been genuinely ambiguous.
What, then, of the contractual analysis? The ‘speedy payment discount’ (SPD) was not in the standard terms & conditions (T&Cs). It was mentioned on bills and in emails notifying customers of bills. Details of the SPD were set out on a separate web page to the general T&Cs. The T&Cs did allow for unilateral changes by TalkTalk, by publication on its website.
TalkTalk argued that it had amended its T&Cs by publishing the SPD details on its website. HMRC argued that the SPD page made no reference to the T&Cs, and that the SPD was a separate process.
The tribunal concluded that:
the general T&Cs had not been amended;
the SPD was a rolling offer of a discount on a month by month basis;
services billing in advance were supplied when paid for; and
the variation of contract, payment and supply all happened simultaneously, so the supply was not made on terms allowing for a prompt payment discount.
Put differently, TalkTalk won the technical argument, but lost the appeal because of the way the paperwork was structured.
There is £10m at stake, and both sides deployed heavy artillery in their legal teams, so an appeal seems likely. Expect it to focus on what the Supreme Court really meant about the interaction between contractual documents and commercial and economic reality in Secret Hotels2 v HMRC [2014] UKSC 16. It seems fair for TalkTalk to argue that the SPD was an open offer to all relevant customers, and that the phrase ‘on terms’ in para 4(1) should apply more widely than just the T&Cs.
.tmb-editorspic.jpg?sfvrsn=df04ab27_1)
