VAT on supplies of phone cards

On 3 May the CJEU issued its judgment in the long awaited Lebara phone cards VAT case (Case C-520/10).

In brief the court concluded that when Lebara issues a phone card to a third party distributor it makes only one supply. HMRC had taken the view that Lebara in fact made two supplies – one to the distributor at the time of issue and one to the end user when the phone card was redeemed. This judgment means that the UK's law is incompatible with the VAT Directive and requires amendment.

On 10 May 2012 HMRC announced via HMRC Brief 12/12 that it intends to amend UK legislation to bring it more in line with EU legislation. The proposed change will affect not just phonecards but...