The King on the application of Glint Pay Services Ltd v The Commissioners for HM Revenue & Customs
| Jurisdiction | England & Wales |
| Judge | Sir Ross Cranston |
| Judgment Date | 30 June 2023 |
| Neutral Citation | [2023] EWHC 1621 (Admin) |
| Docket Number | Case No: CO/2330/2019 |
| Court | King's Bench Division (Administrative Court) |
[2023] EWHC 1621 (Admin)
Sir Ross Cranston sitting as a High Court judge
Case No: CO/2330/2019
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
David Bedenham and Christopher Leigh (instructed by KPMG LLP) for the Claimant
Andrew Macnab (instructed by the Solicitor and General Counsel for HM Revenue and Customs) for the Defendant
Hearing date: 20 June 2023
Approved Judgment
This judgment was handed down remotely at 10.30 am on 30 June 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
INTRODUCTION
The claimant, Glint Pay Services Ltd (“Glint”), challenges the decision of the Commissioners for His Majesty's Revenue & Customs (“HMRC”) in March 2019 that its supplies of gold bullion are to be treated as exempt from VAT pursuant to Group 15 of Schedule 9 to the Value Added Tax Act 1994 (“VAT Act 1994”), not zero-rated pursuant the Value Added Tax (Terminal Markets) Order 1973, SI 1973/173 (the “TMO”). This has the consequence that Glint is not entitled to deduct input tax attributable to the making of those supplies.
On receipt of the March 2019 decision, Glint asked HMRC to conduct a statutory review. In June 2019, HMRC notified Glint that its decision had been upheld on different grounds, namely that Glint makes supplies of gold under Item 1 or 2 of the Investment Gold Exemption, not Item 3.
Glint appealed to the First-tier Tribunal (Tax Chamber) (“FTT”) under section 83 of the VAT Act 1994. Glint withdrew the FTT appeal in October 2021. The upshot is that the March 2019 decision is to be treated as upheld without variation for all purposes as if the FTT had determined the appeal: VAT Act 1994, s. 85(1); Meridian Defence & Security Ltd [2014] UKFTT 300 (TC), [23]. HMRC has made an assessment to VAT if the supplies are treated as exempt, which has not been appealed to the FTT.
Consequently, Glint accepts that as a matter of VAT law its supplies of gold are exempt. However, based on its public law arguments it maintains that it supplies should be treated as zero-rated. Glint's claim turns on what is contained in a Memorandum of Understanding between the London Bullion Market Association (“LBMA”), the London Platinum and Palladium Market (“LPPM”), and HMRC (“MOU”). Glint claims (1) that the MOU gives it a legitimate expectation of a zero-rating for VAT, frustration of which is an abuse of power, and (2) that in light of it, HMRC's March 2019 decision is irrational.
There is no issue that the High Court is the appropriate forum for Glint's public law challenge to the March 2019 decision.
BACKGROUND
Glint was incorporated in 2016 under the laws of England and Wales. At all material times it has been registered for VAT. It is regulated by the Financial Conduct Authority and is an Electronic Money Issuer institution. It is head-quartered in the UK but operates internationally. Glint is not a member of the LBMA.
Glint's contracts
There are a set of contracts providing the context for Glint's services.
Glint-client relationship
As part of its business Glint enables its clients (who are individual members of the public) to buy, hold and sell gold and, if they so choose, to use the proceeds to finance spending on a linked Mastercard account. The gold has been refined by refineries accredited by the LBMA and assayed for its purity and fineness.
In the pack given to customers and on its website, Glint described itself as providing “reliable money”:
“Invest in Glint: the world's first multi-currency payments solution that gives instantaneous ownership of gold and the ability to use it as money digitally through an app and debit card.”
In this material Glint's “market validation” is stated as: “Glint is unique and differentiated.” It is said that Glint is providing a global currency: “Spend gold digitally for the very first time”. “Buy gold…save gold…spend gold”, the description continued. Under the heading “Reliability and Choice”, Glint states: “Through our innovative app and Mastercard you can now use physical gold as money. Glint also allows you to buy, save and spend British pounds, Euros, and US dollars.” It owns its technology and it “uniquely enables gold to be used as money.”
The Glint-client relationship is governed by a standard form contract which clients enter with Glint, the “Gold Account Terms & Conditions”. Glint supplies gold to its customer pursuant to these terms and conditions. None of this takes place on the London Bullion Market and none of the terms and conditions of that market are incorporated by reference in Glint's standard form contract.
Glint supplies its clients with gold as principal. It does this over the counter electronically by way of the bespoke mobile application (“the app”). The app operates and interacts with the Mastercard system. In essence, it works by allocating to Glint's clients e-money accounts in various currencies (e.g., USD, EUR or GBP) and a separate gold account. All of these accounts are linked to a Mastercard account and a Mastercard prepaid debit card which is issued by Glint to its client. A client can transfer funds into their e-money account through a debit card transaction or bank transfer. Once they have done so, the funds are held at Lloyds Bank and the client may use available funds to either pay for spending transactions using the Glint Mastercard or purchase gold in their gold account.
When a client wishes to purchase gold, they submit a request to do so via the app and a real-time spot price for the transaction is instantly published in the app. Should the client wish to proceed based on the quoted spot price, they complete the purchase and the client's gold account is immediately credited with the appropriate amount of gold. Subsequently, Glint aggregates the gold trades which have been made by its clients as a whole and it settles on a spot rate with the liquidity provider. It then purchases the necessary amount of gold to meet the credits already made to the client's gold account. At the relevant time, the aggregated trades occurred, on average, twice a day. The procedure is largely mirrored in reverse when a client wishes to sell gold.
Glint's clients also have the ability to sell gold to settle a Mastercard transaction. When the client requests this via the app, Glint automatically removes the specific value of the Mastercard transaction from the Client's gold account, sells that quantity of gold and uses the proceeds to settle the Mastercard transaction.
Ownership of the gold, together with all transaction details, is recorded by the app, which is the ledger of record for the gold purchased and sold by Glint's clients. There is nothing in the “Gold Account Terms & Conditions” for anything to be done by any other party to effect or evidence Glint's transactions of gold with its customers.
Glint-StoneX contracts
StoneX (formerly known as INTL FCStone) provides its customers with execution, clearing and advisory services in the financial and commodities markets. It is a member of the LBMA.
Glint has contracts with StoneX under which StoneX provides various services to Glint. First, StoneX has custody of the gold, which it provides to Glint as part of a larger stock which is has available: Custody Agreement for Previous Metals, 2017, preamble. StoneX is Glint's sole liquidity provider. Glint and StoneX act as principals with each other.
Secondly, when one of Glint's client wishes to purchase or sell gold the spot rate is quoted by StoneX. It generates a spot price using the prevailing market value of the gold at the date and time on which the client requests the transaction. That spot rate is then supplied to the client.
Glint-Brink's contracts
The gold which Glint buys and sells to its client is at all times physically held in vaults operated by Brink's Global Services Limited (“Brink's”) in Zurich, Switzerland. It is stored within a segregated section of the vault. Brink's has ultimate liability for the gold's preservation and protection.
Brink's is a member of the LBMA.
The MOU
The LBMA, LPPM and HMRC entered into the MOU in April 2013. The MOU is entitled “Memorandum of Understanding between [HMRC] and the London Bullion Market Association and London Platinum and Palladium Market on the transactions effected by their members and the VAT issues arising”. There was no evidence before the court about the origins of the document.
Section 1 of the MOU states as a purpose to assist members of the LBMA, LPPM and HMRC to understand the transactions that take place on the London Bullion markets; determine the supplies that take place for VAT purposes; determine the liability to VAT of supplies that take place for VAT purposes in respect of the different precious metals and markets; and confirm those transactions that need to be reported on quarterly statistical reports of cross-border services.
That section adds that the reliefs from VAT that the markets enjoy are an integral part of their success, and that it is recognised that “markets are ever changing and legislation is static; we are grateful for the opportunity to assist HMRC in ensuring that the reliefs are still relevant and up to date.”
The MOU's terms
Section 3 of the MOU is headed “Transactions Undertaken”. Paragraph 3.1 of the MOU provides that:
“3.1 Relief from VAT on the London Bullion and London Platinum and Palladium Markets is provided by the [TMO] which applies the zero rate of VAT to sales of goods ordinarily dealt with on the market…Together, the Terminal Markets Order and the Investment Gold Directive relieve...
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