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The decision comes after auditors were unable to sign off the MVNO’s 2022 accounts
Lycamobile has lost a major dispute with UK tax authorities over its unpaid VAT, according to a report from the Financial Times.
Lyca Mobile is one of the world’s largest Mobile Virtual Network Operators (MVNOs) and provides services using EE’s network in the UK.
The dispute is related to the unpaid VAT placed on customer “bundles” over the last seven years, amounting to £51 million.
Earlier this year, the company’s auditor PKF Littlejohn confirmed that it was unable to sign off its 2022 accounts. Lycamobile had claimed that it did not have to pay VAT unless customers had used the bundle packages (e.g. calls, text, and data allowances).
A tax tribunal, however, has backed HMRC, which argued that the VAT was chargeable at the point of sale, regardless of whether the customer then used the package.
According to the most recent 2022 company accounts, the company had1.7 million subscribers with revenues of £145 million. It has set aside £99 million to cover the VAT costs, but the actual amount will be decided at a later date.
“We are pleased with the judgment, which is consistent with the VAT treatment applied across the telecoms sector,” said a spokesperson for HMRC this morning.
Lycamobile has confirmed that it accepts the tribunal decision, saying the ruling “takes us one step closer to resolution” and the company is “pleased that it found there should be an adjustment to the amount of VAT assessed in relation to some of the products.”
Lyca will now work with HMRC to apply the ruling, though still has the option to appeal.
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