The Commissioners for Her Majesty's Revenue and Customs v Mr P A Newey t/a Ocean Finance
| Jurisdiction | UK Non-devolved |
| Judgment Date | 26 November 2001 |
| Neutral Citation | [2015] UKUT 0300 (TCC) |
| Appellant | REVENUE AND CUSTOMS |
| Respondent | |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Appeal Number | FTC/76/2010 |
[2015] UKUT 0300 (TCC)
Appeal number: FTC/76/2010
VAT – scheme to avoid irrecoverable input tax on supplies of advertising
services to loan broking business – establishment of loan broking business
in Jersey with processing services provided by UK business – whether UK
business made supplies of loan broking services – whether scheme an
abuse – F-tT decision holding supplies of advertising services made to
Jersey business and no abuse – HMRC’s appeal dismissed
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS Appellants
- and -
PAUL NEWEY
(t/a OCEAN FINANCE)
Respondent
TRIBUNAL:
MR JUSTICE WARREN
Sitting in public at The Royal Courts of Justice, Rolls Building, Fetter Lane,
London EC4 on 4 and 5 November 2014
Owain Thomas and Isabel McArdle, instructed by the General Counsel and
Solicitor to HM Revenue and Customs, for the Appellants
Julian Ghosh QC, Elizabeth Wilson and Jonathan Bremner instructed by
Ashurst LLP for the Respondent
© CROWN COPYRIGHT 2015
DECISION
Introduction
1. This appeal concerns the effect for VAT purposes of a scheme designed to obtain
a tax advantage. It involves the creation of a company in Jersey (initially Lichfield
(CI) Ltd (“Lichfield”) and later Alabaster (CI) Ltd (“Alabaster”) to which the
respondent (“Mr Newey”), who traded as Ocean Finance, transferred a loan broking
business previously carried on by him in the UK. His position is that after the transfer
it was Lichfield and then Alabaster, rather than he himself, which made supplies of
loan brokerage services to various UK lenders and that it was those companies, rather
than Mr Newey himself, which received supplies of advertising services. The
questions in the appeal before the First-tier Tribunal were:
a. Who made the supplies of loan brokerage and correspondingly who was in
receipt of the advertising supplies for VAT purposes in the relevant period
(ie was it Alabaster or Mr Newey who received the supplies of advertising
services)? and
b. If Alabaster was the recipient, is that conclusion altered by the principle of
abuse of law?
2. In their decision released on 23 April 2010 (“the Decision”), Judge Berner and
Mrs Neill (“the Tribunal”) held that it was Alabaster, and not Mr Newey, which
made the supplies of loan brokerage services and which was the recipient of
advertising supplies. Further, while holding that the essential aim of the structure
involving Alabaster was to gain a tax advantage, there was no abuse as neither the
scheme nor any of the arrangement involving Alabaster was contrary to the purposes
of Directive 77/388/EEC (“the Sixth Directive”). The Appellants (“HMRC”) were
given permission to appeal. The Upper Tribunal referred 6 questions to the Court of
Justice of the European Union (“the CJEU”) on 13 December 2011. The CJEU
Judgment was delivered on 20 June 2013 by the Third Chamber without having
received an Advocate-General’s opinion. I shall refer to it in this decision as “the
CJEU Judgment” and to its paragraph numbers as CJEU.
3. I will come to some of the detail of the Decision and of the CJEU Judgment in due
course. In summary, HMRC say that the CJEU was giving new guidance when it said
that the correct approach was to assess the economic and commercial reality of the
transactions at issue and that the contractual arrangements were a factor, but only a
factor, to be taken into account. They say that the Tribunal was in error because it did
not apply that approach but instead assigned decisive importance to the contractual
structure which had been brought about solely for the purpose of obtaining a tax
advantage rather than for any commercial reason. Mr Newey contends that the CJEU
was doing no more that to re-state existing established principles and that the Tribunal
applied those principles correctly.
4. The parties have argued the appeal by reference to, essentially, the same issues as
were argued before the Tribunal, the issues identified by them being:
a. Whether the Tribunal erred in its approach to the characterisation of the
supplies of loan broking services as made by Alabaster and of advertising
services received by Alabaster (rather than Mr Newey in each case) by
failing to have regard to the economic reality in contrast with the position
as set out in the relevant contractual documentation (“the
Characterisation of Supplies Issue”); and
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