Services supplied on terms allowing a prompt payment discount

Virgin Media provided telephony services to customers through fixed lines. In the period 28 August 2012 to 30 April 2014 it provided a fixed line rental for monthly payments at £13.90 or a single one of £120 covering 12 months.

It submitted its VAT returns on the basis that the 12-month option was a discount for prompt payment. As a result VATA 1994 Sch 6 para 4 (before it was amended with effect from 1 May 2014) applied to deem the monthly customers to have given consideration for the fixed line rental supply by reference to £10 a month (one-twelfth of £120) rather the £13.90 they paid.

HMRC disagreed. The First-tier Tribunal dismissed the company’s appeal holding that the supplies to the monthly customers were not ‘supplied on terms allowing a discount for prompt payment’. The supplies were on different terms from those to the saver customers (those...