The Court of Appeal has judged that matchmaking services supplied by Gray & Farrar International LLP (G&F) from the UK to clients outside the UK and EU were not a provision of consultancy services nor the processing/supply of information. As such they failed to meet the conditions within article 59(c) of Council Directive 2006/112/EC that would have taken the services outside the scope of VAT. The services were therefore liable to UK VAT (HMRC v Gray & Farrar International LLP [2023] EWCA Civ 121).
The First-tier Tribunal ([2019] UKFTT 684 (TC)) had initially found that the company was liable to UK tax arguing that, although the service provided was a single composite service, a significant component of it was post-introduction liaison that did not constitute expert advice. The support provided was in addition to the information and expert advice supplied and was not sufficiently inconsequential to be just part of those elements. On that basis, “the service provided went beyond the provision of information and expert advice and did not fall within para (c)”.
The Upper Tribunal ([2021] UKUT 293 (TCC)) subsequently reversed this, judging that the FTT had erred in law as the correct test to apply to a composite supply was the “predominant element test” and the FTT had failed to consider this. If it had it would have concluded that the addition of post-introduction liaison services was not sufficient to displace the conclusion that the combination of expert advice and the provision of information regarding a potential match was the predominant element of the supply.
HMRC appealed to the Court of Appeal arguing that:
- Ground One – The predominant element test was not mandatory.
- Ground Two – If the predominant element was the appropriate test then the supply was a single service concerned with the provision of introductions and the provision of information and advice were simply the means of performing the introductory service.
- Ground Three – The phrase “services of consultants” was limited to supplies made by members of “liberal professions”, characterised by a high-level of qualification and subject to strict regulation. G&F’s services and personnel did not meet this criteria.
- Ground Four – The phrase “data processing and the provision of information” in article 59(c) should be read conjunctively, both elements were required, simple provision of information was not sufficient.
Ground One
With regards to Ground One, the predominant element test, Lady Justice Simler judged:
“The language used by the CJEU in setting out this test is mandatory. Where it is possible to do so, the predominant element must be determined. This is the primary test to be applied for this purpose.”
Ground Two
Considering Ground Two and applying the predominant element test Lady Justice Simler concluded:
“the very purpose of the contract was for G&F to introduce its clients to a minimum number of suitable prospective partners in exchange for a fee. This was the economic and commercial reality of the transaction, and its economic purpose … In my judgment accordingly, the service provided by G&F was not a service habitually supplied by consultants or consultancy firms giving expert advice to a client. What it did was different. Nor was the service either data processing or the supply of information. Accordingly, I would allow the appeal on ground 2 and restore the decision of the FTT.”
Grounds Three and Four
Lady Justice Simler added:
“My conclusions in relation to ground 2 make it unnecessary to go on and address the issues raised by grounds 3 and 4. I have not found these issues to be straight forward and since their resolution is not necessary for the disposal of this appeal, I prefer to leave these issues to another case.”
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