An apt tax case to report about on Valentine’s Day.  The services of a matchmaker have been held not to be the services of ‘consultants, engineers, consultancy bureaux, lawyers, accountants, and similar services’ meaning that VAT was chargeable on the supply of services to customers based outside of the EU.

At the relevant time for the case the UK was within the EU but since Brexit the rules have changed to ‘customers based outside of the UK’.  Where services of consultancy and similar are provided to non-businesses outside of the EU then for these services the place of supply is considered to be where the customer belongs and are not subject to VAT.  Where the services do not qualify for this treatment then the services will be subject to VAT as the general rule is that the services are taxed where the supplier is located.

The lower tax tribunals had differed in their treatment of the services provide.by the matchmaker.  The First-tier Tribunal held that the services were principally those of introductions, and therefore not qualifying for special treatment while the Upper Tribunal (UT) reversed this holding that the services were a composite supply of expert advice and provision of information.  The CoA held the approach taken by the UT was correct, in that in decided what was being provided attention had to made of what was predominately perceived by the customer as being received.  But, on review of the contractual relationship between the agency and the customer the agency was only bound to provide introductions so the predominate supply could only be introductions, any advice or information given was subsidiary to the introductions.  While the UT had applied the correct test it hadn’t reviewed the contractual position and applied the test to the contractual position which simply stated that the agency would provide introductions.

In endorsing the appropriate test to apply when considering complex composite supplies the CoA has made it easier for the lower tax tribunals to apply the correct tests.

The decision can be found at: The Commissioners for HMRC v Gray & Farrar International LLP – Find case law (nationalarchives.gov.uk)

Please contact us if you have any questions on VAT or make outside of the scope, exempt, reduced or taxable supplies.  We can help with compliance and planning.  Errors with VAT can be costly as the business supplying the matchmaking service will now have to find the outstanding VAT from its resources with no likely recourse to its customers.