Singer & Friedlander Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 17 January 1989 |
| Date | 17 January 1989 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
VAT Tribunal
The following cases were referred to in the decision:
American Leaf Blending Co v Director-General of Inland Revenue ELR[1979] AC 676
Apple & Pear Development Council; C & E Commrs v VAT(1986) 2 BVC 200,198
Binder Hamlyn VAT(1983) 1 BVC 1190; (1983) VATTR 170
Guy Butler (International) Ltd.; C & E Commrs v VAT(1976) 1 BVC 84
IR Commrs v Brackett & related appeals TAX[1986] BTC 415
Re MacManaway ELR[1951] AC 161
Vincent Consultants Ltd VAT(1988) 3 BVC 808; (LON/88/254) No. 3091
Assessment - Supplies to overseas persons - Whether supplies made to persons belonging outside the UK and EC - Whether supplies of financial services - Value Added Tax Act 1983, schedule 5 group 9Sch. 5, Grp. 9, item 6.
The issue was whether the appellant (S & F) was liable for VAT in the sum of £58,695.65 on certain supplies made to a company, Apricot Ltd, which was registered in the Isle of Man.
In 1984 a company, Applied Computer Techniques Holding plc ("ACT"), which manufactured computers and computer software, had been anxious to market its goods in the UK. An opportunity occurred in 1984 when an American company went out of business. ACT decided to set up a company in America to market its products. Capital of $20m had to be raised speedily to obtain the services of the agents of the defunct company. It was not possible to raise the money in the US within the time-limits necessary and accordingly, the appellant advised that a company should be incorporated in the Isle of Man to be the holding company. Its capital, once raised, would be used to buy the share capital of the US company, which would market ACT's products in America. A company, Apricot Ltd, was incorporated in the Isle of Man on 1 November 1984 and Apricot Inc in Nevada USA on 6 November 1984. On 12 November a written agreement was entered into between Apricot Ltd, its directors, ACT, its directors and the appellant. In this agreement, a total of 10m shares of $0.01 in Apricot Ltd would be issued at 160p per share, thus raising £16m capital. ACT agreed to subscribe in cash for 1999,900 shares and the appellant agreed to subscribe or procure subscribers for the remaining 8000,100 shares. The appellant, by entering into this agreement, made arrangements for the issue of shares and underwrote those issues and, in consideration for so doing, was paid a commission of 2.5 per cent on the total shares subscribed to by the public.
On 4 January 1985, the appellant sent two invoices to Apricot Ltd in respect of their services. The first invoice was for "fees for services … in connection with the recent [issue]" £350,000 and the second issued for "services in … placing [the shares]" £100,000. In each case VAT was shown at the zero rate.
The invoices were sent to Apricot Ltd which had no employees in the Isle of Man other than the secretary. It had no premises in the US. Between 9 November 1984 and 11 March 1986, nine board meetings were held at various places in California which were joint meetings with the board of Apricot Ltd and of Apricot Inc. The purpose of these meetings was to monitor the progress of Apricot Inc.
The appellant contended that the services it provided for Apricot Ltd were zero-rated because they fell within the provisions of the Value Added Tax Act1983, Sch. 5, Grp. 9, item 6 being financial services supplied in the US.
The Customs argued that the appellant's services supplied to Apricot Ltd were the making of arrangements for the issue of shares and underwriting that issue, and that those were not financial services. In any event, a supply was made to Apricot Ltd which belonged in the Isle of Man and therefore did not fall within the provisions of Grp. 9. Apricot Ltd had no office and no employees in the US nor any fixed establishment there.
In the alternative, the appellant contended that, if its services were not zero-rated, they were exempt because they fell within the Value Added Tax Act 1983, schedule 5 group 5Sch. 5, Grp. 5, item 6.
Held, dismissing the company's appeal:
Apricot Ltd was, at the material time, carrying on a business within the meaning of that term in eu-directive notrep article 4art. 4,article para. 2para. 2 of the Sixth EC Directive. The company did not have a fixed office or employees in the US and its affairs were conducted by a board of directors, who met intermittently in various hotels and other places, and so the company did not have a business establishment in America. The services supplied by the appellant were financial services and so, if they were supplied to a person who belonged outside the UK and the Isle of Man, they would be zero-rated. However, the place where services were supplied was a place where the fixed establishment or permanent address of the recipient was. There must be a place where the recipient of the services had established his business. Apricot Ltd had not established its business in the USA and accordingly, the place of supply was where it had its registered office, i.e. the Isle of Man.
The appellant's alternative submission was also dismissed because item 6 was concerned with "dealing" and not, as in the present case, "underwriting".
[The tribunal set out the facts summarised above and continued as follows.]
These being the facts it was the primary submission made by Mr Prosser, who appeared for S & F, that the services provided by S & F for Apricot Ltd were zero-rated. He argued that this was so because they fell within the provisions of Value Added Tax Act 1983 schedule 5 group 9Sch. 5, Grp. 9, item 6 of the Value Added Tax Act 1983. schedule 5Schedule 5 sets out under various Groups, the supplies of goods and services which are to be treated as zero-rated. Group 9 is entitled "International Services" and item 6 of that Group (so far as relevant) covers the following:
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6. The supply to a person who belongs in a country, other than the Isle of Man...
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