A series of recent First-tier Tribunal rulings are now listed for appeal to the Upper Tribunal, each raising significant questions around VAT classification, liability, and compliance. These cases span sectors including telecoms, hospitality, healthcare, and consumer goods — and could have wide-reaching implications for businesses navigating VAT risk.
Lycamobile UK Ltd
Lycamobile’s 2024 tribunal case examined when VAT becomes payable on prepaid telecom bundles offering minutes, texts, and data. HMRC argued VAT was due at the point of sale, while Lycamobile contended it should be deferred until the bundle was used. The tribunal sided with HMRC, ruling that the bundle constituted a single supply — making VAT payable at the time of sale. Lycamobile has appealed this decision.
Realreed Ltd
Realreed operates serviced accommodation in London. The tribunal considered whether its short-term furnished lets qualified for VAT exemption or were akin to hotel services. After assessing factors like duration, amenities, and marketing, the tribunal concluded the accommodation was similar to a hotel — and therefore not exempt from VAT. Realreed has appealed this decision.
Align Technology Switzerland GmbH & Anor
Align Technology supplies custom-made orthodontic aligners (Invisalign). The company treated these as VAT-exempt dental prostheses. HMRC disagreed, arguing the standard VAT rate should apply. The tribunal ruled in favour of Align, confirming the aligners qualify as exempt dental prostheses due to their bespoke nature and prescription by dental professionals. HMRC has appealed the decision.
Eurolaser IT Ltd
Eurolaser was denied input tax recovery after its agent was found to be involved in fraudulent transactions. The tribunal attributed the agent’s knowledge to the company, despite directors claiming ignorance. This case highlights the VAT risks businesses face when agents act fraudulently on their behalf. Eurolaser has appealed this decision.
Bottled Science Ltd
Bottled Science sells “Skinade,” a collagen drink marketed for skin health. The company claimed it should be zero-rated as a food product and sought a refund of over £1 million in output tax. The tribunal disagreed, finding that despite being fit for human consumption, the product’s presentation and purpose classified it as a cosmetic. Bottled Science is appealing the decision.
Need Help Navigating VAT Risk?
If your business operates in telecoms, hospitality, healthcare, or consumer goods, these appeals may impact your VAT obligations. Xeinadin’s Indirect Tax team offers expert guidance on VAT classification, compliance strategy, and dispute resolution.
Contact us today to discuss how these developments could affect your operations — and how we can help you manage uncertainty with confidence.
