UT/2023/000044 - [2024] UKUT 00284 (TCC)

So far as material, the PVD provided:

“Article 62

For the purposes of this Directive:

(1)

‘chargeable event’ shall mean the occurrence by virtue of which the legal conditions necessary for VAT to become chargeable are fulfilled;

(2)

VAT shall become ‘chargeable’ when the tax authority becomes entitled under the law, at a given moment, to claim the tax from the person liable to pay, even though the time of payment may be deferred.

Article 63

The chargeable event shall occur and VAT shall become chargeable when the goods or the services are supplied.

…

Article 65

Where a payment is to be made on account before the goods or services are supplied, VAT shall become chargeable on receipt of the payment and on the amount received.

Article 66

By way of derogation from Articles 63, 64 and 65, Member States may provide that VAT is to become chargeable, in respect of certain transactions or certain categories of taxable person at one of the following times:

…

(b)

no later than the time the payment is received;

…

Article 73

In respect of the supply of goods or services ... the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.

…

Article 79

The taxable amount shall not include the following factors:

(a)

price reductions by way of discount for early payment;

(b)

price discounts and rebates granted to the customer and obtained by him at the time of the supply;

…

Article 90

“(1)

... where the price is reduced after the supply takes place, the taxable amount shall be reduced accordingly under conditions which shall be determined by the Member States.

…”

The above provisions of the PVD are implemented in United Kingdom legislation by the provisions of the VATA and the Value Added Tax Regulations 1995 (‘the VAT Regs’). Articles 62, 63, 65 and 66 of the PVD are implemented by section 6 of the VATA which relevantly provides:

“(1)

The provisions of this section shall apply … for determining the time when a supply of goods or services is to be treated as taking place for the purposes of the charge to VAT.

…

(3)

Subject to subsections (4) to (14) below, a supply of services shall be treated as taking place at the time when the services are performed.

(4)

If, before the time applicable under subsection … (3) above, the person making the supply … receives a payment in respect of it, the supply shall, to the extent covered by the … payment, be treated as taking place at the time … the payment is received.

…

(14)

The Commissioners may by regulations make provision with respect to the time at which (notwithstanding subsections (2) to (8) …) a supply is to be treated as taking place in cases where—

(a)

it is a supply of … services for a consideration the whole or part of which is determined or payable periodically, or from time to time, or at the end of any period, or

…

and for any such case as is mentioned in this subsection the regulations may provide for … services to be treated as separately and successively supplied at prescribed times or intervals.”

The relevant regulation made under section 6(14) VATA in this case is Regulation 90 of the VAT Regs which states:

“…where services … are supplied for a period for a consideration the whole or part of which is determined or payable periodically or from time to time, they shall be treated as separately and successively supplied at the earlier of the following times—

(a)

each time that a payment in respect of the supplies is received by the supplier, or

(b)

each time that the supplier issues a VAT invoice relating to the supplies.”

In this case, TalkTalk did not issue VAT invoices so only regulation 90(a) is relevant. It follows that, whether section 6(4) or regulation 90 applies, the time of the supply of services billed by TalkTalk in advance of them being performed was the time that the customer pays TalkTalk. Where services are billed in arrears, the time of the supply would be when the services are performed unless regulation 90 applies in which case the time would be when the payment is received.

Articles 73 and 79 of the PVD are implemented by section 19 of and Schedule 6 to the VATA. Section 19(1) provides that the value of any supply of goods or services must be determined in accordance with that section and Schedule 6 unless otherwise provided by or under the VATA. Section 19(2) provides that where a supply is made for consideration in money, the amount of money is treated as including the VAT. Paragraph 4 of Schedule 6 is set out at [3] above.