Vodafone wins VAT rebate appeal

Vodafone is entitled to reclaim £4.1m in VAT, a tribunal has ruled, after the mobile phone operator paid too much VAT after using a loyalty scheme to rewards its customers.

Vodafone argued that that it should have reduced its output tax liability on its sales to reflect its costs of awarding Nectar points to its customers.  HMRC rejected the claim in 2007 and Vodafone appealed to the VAT Tribunal.

Although there is disagreement over Vodafone's output tax as a result of its participation in the Nectar scheme, HMRC accepted that Vodafone had over-paid VAT between 2004 and 2006 for unrelated reasons, and an amount far greater than claimed in its voluntary disclosure of 30 January 2007.

Barbara Mosedale, tribunal judge in the case Vodafone v HMRC [2014] UKFTT 701 (TC), said she agreed with Vodafone that "merely adding additional reasons to justify a claim that a particular amount of tax was overpaid does not per se offend against the principle of legal certainty".

Vodafone's appeal succeeds on the basis of UK law, she said.