American Express v HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Proudman |
| Judgment Date | 29 January 2010 |
| Neutral Citation | [2010] EWHC 120 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CH/2008/APP/0167 |
| Date | 29 January 2010 |
[2010] EWHC 120 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
Before: Mrs Justice Proudman
Case No: CH/2008/APP/0167
Roderick Cordara QC (instructed by the solicitor for American Express) for the Appellant
Peter Mantle (instructed by the Solicitor to HMRC) for the Respondents
Hearing dates: 5, 6, 7, 8, 9 October 2009
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mrs Justice Proudman:
Preliminary
This appeal is one in point of law from a decision released on 16 th July 2008 of the London Value Added Tax and Duties Tribunal, which itself upheld a decision dated 21 st January 2003 by the Respondents, HMRC. The effect was to uphold an assessment of VAT in the sum of £607,749 for the period 1 May 2000 to 31 December 2002. However VAT has been paid under protest since the original decision so that the amount at stake is in the region of £2m.
The appeal concerns the place of supply of services provided by the appellant, American Express Services Europe Limited (“Amex Europe”). If and so far as the place of supply is outside the European Union, no VAT is payable. Conversely, VAT is payable if and so far as the place of supply is within the European Union.
American Express Corporation is the parent company in the multi-national financial services group popularly known as Amex. It owns American Express Travel Related Services Company Inc (“AETRSCo”) a company established and operating in the United States and based in the same building in New York as the group headquarters. AETRSCo is itself the parent company of a United Kingdom holding company which is the immediate parent of Amex Europe, a company also established in the UK.
Amex Europe is based in the European Union. AETRSCo is not. Amex Europe's case is that it made multiple supplies to AETRSCo and that the supplies fall within the rules attributing the place of supply to the location of the customer. Alternatively, its case is that the supplies are made in connection with land and they fall within the rules attributing the places of supply to the location of the land so that properties situated outside the UK do not fall within the VAT net. HMRC's case is that the Tribunal correctly found that there was a single supply and that the supply fell within the rule attributing the place of supply to the location of the supplier with the result that all the supplies were taxable to VAT.
I am told that the place of supply rules for VAT purposes are being changed so that the location of the customer will be the usual point of reference for the location of the provision of supplies save for supplies relating to land. Mr Cordara QC (for Amex Europe) points out that his case is therefore in line with the current policy view.
Although the court may consider matters of rationality and competition in accordance with the purpose of the legislation it is not for an appeal court to consider whether a different result would be more appropriate in policy terms. The appeal is confined to points of law. The issue whether a contract involves the provision of one or more supplies for VAT purposes and other issues relating to place of supply are issues of legal evaluation and therefore issues of law: see Dr Beynon & Partners v. Customs & Excise Commissioners [2005] STC 55 at paragraph 26, and the observations of Sir Andrew Morritt C in Zurich v. HMRC [2007] STC 156 at paragraph 34. As Patten LJ (with whom the other members of the Court of Appeal agreed) said in David Baxendale v. Revenue & Customs Commissioners [2009] EWCA Civ 831:
“On an appeal the court is concerned to decide what are the correct VAT consequences of the contractual arrangements which the parties have entered into having regard to such of the background facts as are material for that purpose. The Tribunal's findings of fact are therefore relevant to this exercise but any challenge to their conclusions on the law is not limited to Edwards v. Bairstow principles. The appeal court must decide what is the correct legal outcome by applying to those facts the relevant principles of European law in relation to Article 2 of the Sixth Directive. It is not required to find that the Tribunal has misdirected itself.”
I bear in mind that the legal evaluation may require “a multi-factorial assessment based on a number of primary facts” so that “the appeal court should be slow to interfere with that overall assessment-what is commonly called a value judgment”: per Jacobs LJ in Proctor & Gamble UK v. HMRC [2009] STC 1990 at 1993–5, and see per Lord Hoffmann in Beynon at paragraph 27.
Although in order to intervene the court is not confined to the grounds expounded by Lord Radcliffe in Edwards (Inspector of Taxes) v. Bairstow and Another [1956] AC 14, it should not re-open primary findings of fact. The Tribunal's findings of fact, as set out in paragraphs 12–36 of the decision, ought not to be disturbed unless they are so perverse as to be insupportable. This is an appeal in point of law, not a re-hearing. I also accept Mr Mantle's submission that inferences drawn from primary facts should not be interfered with (save on the Edwards v. Bairstow principle) if they are comprised within a number of possible inferences that could be made: see Furniss v. Dawson [1984] STC 153 at 167.
I must deal with the allegations that the Tribunal misdirected itself. If it did not do so, I am nevertheless required to consider the question whether the Tribunal came to the right conclusion as a matter of law. However I approach the substitution of my own judgment for that of the Tribunal with circumspection in circumstances where, as here, an experienced Tribunal heard and saw a considerable amount of first hand evidence. Particular circumspection is needed where, as here, I was invited by the appellant in the course of argument selectively to consider small portions of a large body of evidence which had been before the Tribunal. It is one thing to review the conclusions of law reached by the Tribunal on the basis of the facts which it found; it is another to substitute one's own conclusions for the “multi-factorial assessment” or value-judgment reached by the Tribunal, having heard a large body of evidence, as a matter of inference from those facts.
The law
Both parties have proceeded on the basis that the relevant provisions for present purposes are the provisions of European law. Art 2(1) of EC Council Directive 77/388 on the harmonisation of the law of member states relating to turnover taxes- Common system of value added tax: uniform basis of assessment (known as the Sixth Directive) has direct effect in the UK. It requires member states to subject to VAT:
“the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such.”
It is common ground that the domestic provisions of the Value Added Tax Act 1994 (s. 7(10) and Schedule 5) and the Value Added Tax (Place of Supply of Services) Order 1992 SI No 3121 have to be construed consistently with the European law provisions. It is also common ground that I should follow the lead of the Tribunal and focus in particular on Article 9 of the Sixth Directive.
The relevant recital to the Sixth Directive, which applied to supplies of goods as well as services, is as follows:
“Whereas the determination of the place where taxable transactions are effected has been the subject of conflicts concerning jurisdiction as between member States, in particular as regards supplies of goods for assembly and the supply of services; whereas although the place where a supply of services is effected should in principle be defined as the place where the person supplying the services has his principal place of business, that place should be defined as being in the country of the person to whom the services are supplied, in particular in the case of certain services supplied between taxable persons where the cost of the services is included in the cost of the goods.”
The relevant provisions of Article 9 are as follows,
“1. The place where a service is supplied shall be deemed to be the place where the supplier has established his business or has a fixed establishment from which the service is supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides.
2. However —
(a) the place of supply of services connected with immovable property including the services of estate agents and experts, and of services for preparing and awarding and co-ordinating construction works, such as the services of architects and of firms providing on site supervision, shall be the place where the property is situated;
…
(e) the place where the following services are supplied when performed for customers established outside the Community or for taxable persons established in the Community not in the same country as the supplier, shall be the place where the customer has established his business or has a fixed establishment to which the service is supplied or, in the absence of such a place, the place where he has his permanent address or usually resides:
…
[third indent] services of consultants, engineers, consultancy bureaux, lawyers, accountants and other similar services, as well as data processing and of the supplying of information…”
Mr Mantle submitted that at all times material to this appeal, the basic rule was that the place of supply of services was the place where the supplier and not the customer was...
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