Discount offer was not included in terms

Between 1 January and 30 April 2014 the taxpayer – TalkTalk – offered most of its customers a 15% discount on services if they paid their bills within 24 hours of receiving them – the speedy payment discount (SPD). Only about 3% of customers received the discount.

TalkTalk accounted for VAT on the discounted amount even in cases where the customer did not pay within 24 hours (VATA 1994 Sch 6 para 4). (The legislation has since been changed.)

HMRC did not agree that para 4 applied and raised an assessment to recover the VAT underpaid.

The issue was whether the arrangement fell within the definition which required that goods or services had to be supplied for consideration in money on terms allowing a discount.

The First-tier Tribunal dismissed the taxpayer’s appeal on the basis the condition was not met.

The Upper Tribunal agreed with the First-tier...