JDI International Leasing Ltd v The Commissioners for HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Roth,Judge Falk |
| Neutral Citation | [2018] UKUT 0214 (TCC) |
| Subject Matter | Tax,10 July 2018 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Date | 10 July 2018 |
[2018] UKUT 0214 TCC
Appeal number:UT/2017/0095
VAT – repayment of VAT to non-EU trader under Thirteenth Directive –
whether supplies used for taxable transactions – whether acting as a taxable
person – consideration of Sveda and Iberdrola
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
JDI INTERNATIONAL LEASING LIMITED
Appellant
- and -
THE COMMISSIONERS FOR HER MAJESTY’S
Respondents
REVENUE & CUSTOMS
TRIBUNAL:
MR JUSTICE ROTH
JUDGE SARAH FALK
Sitting in public at The Royal Courts of Justice, Rolls Building, Fetter Lane,
London EC4A 1NL on 15 May 2018
Raymond Hill, instructed by Baker McKenzie LLP, for the Appellant
Michael Jones, instructed by the General Counsel and Solicitor to HM Revenue
and Customs, for the Respondents
© CROWN COPYRIGHT 2018
2
DECISION
1. This is an appeal against a decision of the First-tier Tribunal (“FTT”) (Judge
Jonathan Richards) that the appellant, JDI International Leasing Limited (“JDI”), was
not entitled to recover VAT of approximately £5.4m incurred on the leasing and
purchase of equipment, on the basis that it did not use the equipment for taxable
purposes and was not acting in the capacity of a taxable person for VAT purposes (the
“FTT decision”). The FTT gave permission to appeal.
The facts
2. The full facts are set out in the FTT decision and what follows is a summary.
3. JDI is a Cayman Islands incorporated company which is a member of a group,
referred to in the FTT decision as the Baker Hughes Group. JDI acquired a number of
highly specialised oilfield drilling tools (the “Tools”) and intellectual property rights
relating to the Tools (the “Intellectual Property”) pursuant to an intra-group
reorganisation largely carried out in October 2012. The dispute relates to those Tools
that were located in the UK at the time (the “UK Tools”). JDI leased the UK Tools to
a Dutch company, Baker Hughes Nederland BV (“BHN”), which in turn subleased
them to operating companies in the Baker Hughes Group (the “Operating
Companies”). The Operating Companies make the Tools available to third parties
engaged in oil exploration and production activities.
4. Ownership of the Intellectual Property entitles JDI to manufacture or procure the
manufacture of further Tools, spare parts and other consumables relating to the Tools
(“Spare Parts”). JDI procures the manufacture of Spare Parts from other group
companies and supplies them to the Operating Companies.
5. The FTT decision describes the steps of the intra-group reorganisation at
paragraphs [15] to [17]. Prior to its implementation, the Tools were owned by a
variety of group companies. The UK Tools were owned by a UK company, Oilfield
Tools Limited (“Oilfield Tools”). The Intellectual Property was owned by another
Cayman Islands company, which had granted Oilfield Tools a licence to use it outside
the US. The Baker Hughes Group decided that it would be more efficient for all its
leasing activity outside the US to be centralised in a single entity, and chose JDI. The
aim was that JDI would acquire outright ownership of all the Tools from other group
members, but in some jurisdictions, including the UK, transfer of title to JDI was
delayed and an interim leasing arrangement was put in place.
6. The first step in the reorganisation was to transfer the non-US Intellectual
Property to JDI, with JDI taking over the licence to Oilfield Tools. JDI then served
notice on Oilfield Tools to terminate the licence with effect from 1 October 2012.
Oilfield Tools terminated the operating leases of the Tools to which it was party with
effect from the same date. JDI entered into an agreement to acquire the Tools from
Oilfield Tools on 1 October 2012, but the UK Tools were not transferred pursuant to
this agreement until 22 November 2013 because the group was attempting to obtain
To continue reading
Request your trial