Her Majesty’s Commissioners of Revenue and Customs v Paul Newey.
Date: 2013-06-20
37. In those circumstances the Upper Tribunal (Tax and Chancery Chamber) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1) In circumstances such as those in the present case, what weight should a national court give to contracts in determining the question of which person made a supply of services for the purposes of VAT? In particular, is the contractual position decisive in determining the VAT supply position?
(2) In circumstances such as those in the present case, if the contractual position is not decisive, in what circumstances should a national court depart from the contractual position?
(3) In circumstances such as those in the present case, in particular, to what extent is it relevant:
(a) Whether the person who makes the supply as a matter of contract is under the overall control of another person?
(b) Whether the business knowledge, commercial relationship and experience rests with a person other than that which enters into the contract?
(c) Whether all or most of the decisive elements in the supply are performed by a person other than that which enters into the contract?
(d) Whether the commercial risk of financial and reputational loss arising from the supply rests with someone other than that which enters into the contracts?
(e) Whether the person making the supply, as a matter of contract, sub-contracts decisive elements necessary for such supply to a person controlling that first person and such sub‑contracting arrangements lack certain commercial features?
(4) In circumstances such as those in the present case, should the national court depart from the contractual analysis?
(5) If the answer to question 4 is “no”, is the tax result of arrangements such as those in this case a tax advantage the grant of which would be contrary to the purpose of the Sixth Directive within the meaning of paragraphs 74 to 86 of [ Halifax and Others ]?
(6) If the answer to question 5 is yes, how should arrangements such as those in the present case be recharacterised?’
Consideration of the questions referred
The first to fourth questions
39. It must be remembered first of all that the Sixth Directive establishes a common system of VAT based, inter alia, on a uniform definition of taxable transactions ( Halifax and Others , paragraph 48).
40. Under Article 2(1) of the Sixth Directive, ‘the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such’ is to be subject to VAT. As regards, more specifically, the meaning of supply of services, the Court has repeatedly held that a supply of services is effected ‘for consideration’, within the meaning of Article 2(1) of that directive, and hence is taxable, only if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the value actually given in return for the service supplied to the recipient (Case C‑270/09 MacDonald Resorts  [2010] ECR I-13179, paragraph 16 and the case-law cited).
41. It is also apparent from the case-law of the Court that the term supply of services is therefore objective in nature and applies without regard to the purpose or results of the transactions concerned and without its being necessary for the tax authorities to carry out inquiries to determine the intention of the taxable person (see, to that effect, Halifax and Others , paragraphs 56 and 57 and the case-law cited).
42. As regards in particular the importance of contractual terms in categorising a transaction as a taxable transaction, it is necessary to bear in mind the case-law of the Court according to which consideration of economic and commercial realities is a fundamental criterion for the application of the common system of VAT (see, to that effect, Joined Cases C‑53/09 and C‑55/09 Loyalty Management UK and Baxi Group  [2010] ECR I‑9187, paragraphs 39 and 40 and the case-law cited).
43. Given that the contractual position normally reflects the economic and commercial reality of the transactions and in order to satisfy the requirements of legal certainty, the relevant contractual terms constitute a factor to be taken into consideration when the supplier and the recipient in a ‘supply of services’ transaction within the meaning of Articles 2(1) and 6(1) of the Sixth Directive have to be identified.
44. It may, however, become apparent that, sometimes, certain contractual terms do not wholly reflect the economic and commercial reality of the transactions.
45. That is the case in particular if it becomes apparent that those contractual terms constitute a purely artificial arrangement which does not correspond with the economic and commercial reality of the transactions.
46. The Court has held on various occasions that preventing possible tax evasion, avoidance and abuse is an objective recognised and encouraged by the Sixth Directive (see Halifax and Others , paragraph 71 and the case-law cited) and that the effect of the principle that the abuse of rights is prohibited is to bar wholly artificial arrangements which do not reflect economic reality and are set up with the sole aim of obtaining a tax advantage (see Case C‑162/07 Ampliscientifica and Amplifin  [2008] ECR I‑4019, paragraph 28; Case C‑504/10 Tanoarch  [2011] ECR I‑0000, paragraph 51; and Case C‑326/11 J.J. Komen en Zonen Beheer Heerhugowaard  [2012] ECR I‑0000, paragraph 35).
47. In the main proceedings, it is not disputed that, formally, in accordance with the contractual terms, Alabaster provided the lenders with the supplies of loan broking services and that it was the recipient of the supplies of advertising services provided by Wallace Barnaby.
48. However, taking into account the economic reality of the business relationships between, on the one hand, Mr Newey, Alabaster and the lenders and, on the other hand, Mr Newey, Alabaster and Wallace Barnaby, as apparent from the order for reference and, in particular, the matters of fact mentioned by the Upper Tribunal (Tax and Chancery Chamber) in the third question, it is conceivable that the effective use and enjoyment of the services at issue in the main proceedings took place in the United Kingdom and that Mr Newey profited therefrom.
49. It is for the referring court, by means of an analysis of all the circumstances of the dispute in the main proceedings, to ascertain whether the contractual terms do not genuinely reflect economic reality and whether it is Mr Newey, and not Alabaster, who was actually the supplier of the loan broking services at issue and the recipient of the supplies of advertising services provided by Wallace Barnaby.
50. If that were the case, those contractual terms would have to be redefined so as to re-establish the situation that would have prevailed in the absence of the transactions constituting that abusive practice (see, to that effect, Halifax and Others , paragraph 98).