TalkTalk Telecom Limited v The Commissioners For HMRC

For paragraph 4(1) of Schedule 6 to the Value Added Tax Act 1994 to apply, the supply must be made on contractual terms which permit a reduced payment at an earlier optional payment date than the standard due date. A supplier’s separate offer to accept a lower sum if a customer pays within a stated period does not itself create such terms where it merely offers a monthly variation that takes effect only upon acceptance.

Customers who do not accept that offer receive the supply on the unamended contractual terms. VAT is therefore chargeable on the full sum received from them. The time-of-supply analysis does not alter that conclusion where the necessary contractual terms are absent.

TalkTalk Telecom Limited supplied telecommunications, television and broadband services. Between January and April 2014, it offered most retail customers a 15% Speedy Payment Discount if they paid online within 24 hours of receiving a bill. Only about 3% accepted the offer, but TalkTalk accounted for VAT on the discounted amount for all eligible customers.

HMRC decided that the discount reduced the taxable consideration only where it was actually obtained and assessed underpaid VAT. The First-tier Tribunal dismissed TalkTalk’s appeal in [2023] UKFTT 12 (TC). It held that paragraph 4(1) of Schedule 6 to the Value Added Tax Act 1994 did not apply to the supplies.

TalkTalk appealed on the contractual characterisation of the offer and the time of supply for services billed in arrears.

1. Appeal dismissed. The Upper Tribunal held that TalkTalk had to account for VAT on the full amount received from customers who did not obtain the Speedy Payment Discount.

2. Paragraph 4(1) of Schedule 6 to the Value Added Tax Act 1994 requires a supply made on terms allowing a discount for prompt payment. The provision requires, at minimum, a standard payment date, an earlier optional payment date, and a discount where payment is made on the earlier date. “Prompt payment” was interpreted as early payment, consistently with Article 79(a) of Directive 2006/112/EC.

3. The relevant terms were TalkTalk’s written terms and conditions. The Speedy Payment Discount was not incorporated into them. It was a separate monthly offer to vary the charge, timing and method of payment if the customer accepted it by paying 85% of the bill within 24 hours.

4. For customers who accepted the offer, the variation took effect upon payment. For customers who did not accept it, the original terms remained unchanged and required payment of the full billed amount. Their supplies were therefore not made on terms allowing a prompt-payment discount.

5. The same contractual analysis disposed of the services billed in arrears. It was unnecessary to decide whether their time of supply fell under section 6(3) and (4) of the Act or regulation 90 of the Value Added Tax Regulations 1995. The Respondents’ alternative grounds, including conforming interpretation and instalments, were consequently not determined.

• Upper Tribunal (Tax and Chancery Chamber): dismissed TalkTalk’s appeal and upheld the First-tier Tribunal’s conclusion that paragraph 4(1) did not apply to customers who did not accept the discount offer.
• First-tier Tribunal (Tax Chamber): dismissed TalkTalk’s appeal against HMRC’s decision and assessment: [2023] UKFTT 12 (TC).