The question referred to the Court of Justice in September is whether the price paid included VAT. If it did, then the 3G companies can reclaim VAT like any other business. If it does not, then the government is not due to pay the rebate.
According to papers from the VAT Tribunal, which has been hearing the case to date, and seen by the FT, this depends on whether the 3G auction held by the government can be regarded as a "telecommunications activity", with the government therefore indulging in "economic activity" – for which VAT can be charged.
Five operators – Vodafone, O2, Orange, 3 and T-Mobile – hold the 3G licenses in the UK, after forking out £22.5 billion for the privilege in 2000, but have seen little return in an industry that is struggling to meet expectations. A rebate could amount to £3.35 billion.
