Everything Everywhere is potentially £4 million out of pocket after losing a lengthy legal battle in the European Court of Justice today.
The case, which was originally brought by T-Mobile, involves the additional £3 charge made when customers don’t pay their bills directly from their bank account. T-Mobile said the additional charge was a payment handling charge and – as a financial service – shouldn’t be subject to VAT. However, the ECJ has now ruled it is simply an additional part of the mobile phone bill.
This all dates back to August 2005, when T-Mobile submitted a VAT claim for £4,063,228.08, saying this amount had been ‘overpaid’ for the period August 2003 until July 2005. However, the VAT Commissioners refused the claim, which led to the legal action.
Around 28% of the company’s customers don’t pay by BACS or direct debit.
The ECJ decision is likely to affect a large number of utility companies as well as other telecoms operators.