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HMRC internal manual

VAT Margin Schemes

Specific circumstances: Telephone cards


Telephone cards are generally classed as a supply of services, but in certain circumstances can be considered as a supply of goods. In such circumstances the margin schemes can be used for the sale of these telephone cards as follows.  

  • Phone cards with no credit left: Cards which have no credit remaining or can no longer be used (e.g. Mercury cards) are treated as supplies of goods. This makes them eligible for the margin schemes: VAT is accounted for on the margin between the purchase and selling price, subject to the normal scheme rules. This applies to all completely used cards, regardless of whether or not they carry a face value.
  • Presentation packs which include cards: These are regarded as two supplies, of the card and the pack. To be treated as a separate supply from the card, the pack should have some interest or purpose in itself other than being a means of holding the card. A calculation to work out an apportionment between the pack and the card should take place. As a supply of goods, the pack is eligible for the margin schemes with VAT due on the margin subject to the normal rules. The pack may also be eligible for zero-rating under Group 3 Schedule 8, of the VAT Act 1994, as qualifying printed matter (see Notice 701/10 Zero rating of Books etc).

For information on the general treatment of phone cards you should contact the VAT Supply policy team.