Continuum (Europe) Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 11 February 1998 |
| Date | 11 February 1998 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
C & E Commrs v Civil Service Motoring AssociationVAT[1998] BVC 21
Sparekassernes Datacenter (SDC) v Skatteministeriet VAT(Case C-2/95) [1997] BVC 509
Exemption - Outsourcing by an exempt trader - Whether supplies made by the outsourcing company to the exempt trader were themselves exempt - Whether the outsourcing company made supplies which were a specific and essential part of the main exempt supply - Directive 77/388, sixth VAT directive, eu-directive 77/388 article 13(B)(1)art. 13(B)(d).
The issue was whether supplies made by Sun Alliance Life Ltd in connection with the Daisy personal equity plan (PEP), which were effectively all dealings with the public preparatory to the issue and disposal of units held in the PEP, were exempt supplies.
The appellant made supplies to the Sun Alliance group by taking over its dealings with the public in connection with the issue of the Daisy PEP. The appellant dealt with telephone enquiries, sent out application forms, which when returned were checked by it, and forwarded the checked forms to the PEP host administrator, which issued the units in the unit trust held within the PEP. The general public were unaware that the functions performed by the appellant had been outsourced to it by Sun Alliance.
The appellant contended that the supplies were exempt as "the making of arrangements for any transaction within item 6" of Value Added Tax Act 1994, Value Added Tax Act 1994 schedule 9 group 5Sch. 9, Grp. 5, item 7. It was common ground that the issue of a unit trust fell within item 6. The appellant also contended that the supplies fell within Note (5) to Grp. 5: "Item 7 includes the introduction to a person effecting transactions in securities or secondary securities of a person seeking to acquire or dispose of such securities". The appellant argued that its services were intrinsically linked with the supply of securities and without its services there would be no supply of securities. Even if the services were too far removed from the issue of the securities, they were introduction services.
The commissioners contended that the appellant's supplies were standard-rated supplies of administration. eu-directive 77/388 article 13(B)(1)Article 13(B)(d)(5) of the sixth VAT directive exempted "transactions, including negotiation, excluding management and safekeeping, in shares, interests in companies and associations, debentures and other securities …" The appellant did not negotiate any of the terms on which the investments were issued, did not introduce the investor to Sun Alliance and did not make arrangements for the issue of securities. All the appellant did was make arrangements for the marketing and administration of the PEP.
Held, allowing the company's appeal:
1. The tribunal started from the sixth VAT directive on the basis that domestic law should as far as possible be construed to give effect to the VAT directive.
2. The interpretation of eu-directive 77/388 article 13(B)(1)art. 13(B)(d) had been considered in Sparekassernes Datacenter (SDC) v Skatteministeriet VAT(Case C-2/95) [1997] BVC 509, where the court held that there was no need for the exemption to be restricted to services supplied by a financial institution to the end user. In order to be exempt, the services must form a distinct whole fulfilling the essential functions of a service described in eu-directive 77/388 article 13(B)(1)art. 13(B)(d).
3. The distinction was between a service which could have been part of any supply and a service which is a discrete part of the main supply.
4. In terms of domestic law, the tribunal agreed with the commissioners that the services did not fall within Note (5) as introduction, since the appellant did not introduce the investors to Sun Alliance.
5. In applying that principle, the tribunal could see no reason why, even on the strict construction which must be adopted in interpreting an exempting provision, necessary preliminary parts of the issue or transfer of securities, not being negotiation, should not be a part of an exempt transaction in securities.
6. The appellant's services were specific to the particular issue of units and were an essential part of the transaction, rather than an input into the transaction which was necessary to the transaction taking place.
7. Accordingly, the transactions undertaken by the appellant in relation to the issue and cashing of the units were exempt.
[The tribunal set out the facts summarised above and continued as follows.]
17. Mr Leslie Allen, for the appellant, contended that the supplies made by the appellant in this case were exempt as "the making of arrangements for any transaction within item 6" in Value Added Tax Act 1994 schedule 9 group 5item 7 of Grp. 5 of Sch. 9 to the Value Added Tax Act 1994. It is common ground that the issue of units in a unit trust falls within item 6. Alternatively he contended that the supplies fell within Note (5): "Item 7 includes the introduction to a person effecting transactions in securities or secondary securities of a person seeking to acquire or dispose of such securities." He contended that the...
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