Wellcome Trust Ltd v Commissioners of Customs and Excise.
Date: 1996-06-20
31 Although, as is clear from the information provided in the order for reference, the Trust does not have the status of a professional dealer in securities in the United Kingdom, that fact does not necessarily mean that an activity, such as that at issue in the main proceedings, consisting in the acquisition and sale of shares and other securities cannot, in some cases, be treated as an economic activity within the meaning of Article 4 of the Directive. According to the Court' s case-law (see the judgment in Case C-60/90 Polysar Investments Netherlands v Inspecteur der Invoerrechten en Accijnzen, Arnhem [1991] ECR I-3111, paragraph 12), Article 4 confers a very wide scope on VAT.
32 However, it is also clear from that case-law that mere exercise of the right of ownership by its holder cannot, in itself, be regarded as constituting an economic activity. The Court has so held with regard to financial holdings acquired by holding companies in other undertakings (see, in particular, the judgments in Polysar Investments Netherlands, cited above, paragraph 13, and in Case C-333/91 Sofitam v Ministre chargé du Budget [1993] ECR I-3513, paragraph 12).
33 As the Commission appositely pointed out, if such activities do not in themselves constitute an economic activity within the meaning of the Directive, the same must be true of activities consisting in the sale of such holdings.
34 Now, the Trust manages the assets it holds, consisting in part of its shareholding in the Foundation and of other financial instruments. Its investment activities, as described above, consist essentially in the acquisition and sale of shares and other securities with a view to maximizing the dividends and capital yields which are destined for the promotion of medical research.
35 It is true that, by virtue of Article 13B(d)(5) of the Directive, transactions in shares, interests in companies or associations, debentures and other securities may fall within the scope of VAT. This will be the case, in particular, where such transactions are effected as part of a commercial share-dealing activity or in order to secure a direct or indirect involvement in the management of the companies in which the holding has been acquired (Polysar Investments Netherlands, cited above, paragraph 14). However, as is clear from the order for reference, the Trust is forbidden to engage in precisely such activities, being required to make all reasonable efforts to avoid engaging in trade when exercising its powers and being precluded from taking majority holdings in other companies.
36 Consequently, and irrespective whether the activities in question are similar to those of an investment trust or a pension fund, the conclusion must be that a trust which is in a position such as that described by the referring tribunal must, in the light of Article 4 of the Directive, be regarded as confining its activities to managing an investment portfolio in the same way as a private investor.
37 Furthermore, contrary to the arguments of the appellant, neither the scale of a share sale, such as the Second Share Sale carried out in this case, nor the employment, in connection with such a sale, of consultancy undertakings can constitute criteria for distinguishing between the activities of a private investor, which fall outside the scope of the Directive, and those of an investor whose transactions constitute an economic activity. Apart from the fact that large share sales may also be carried out by private investors, the appellant' s argument, if accepted, would mean that the classification of a transaction as an economic activity would depend on the investor' s skill and experience.
38 As far as the principle of fiscal neutrality is concerned, this does not have the significance attributed to it by the appellant. While it requires that all economic activities should be treated in the same way, it also assumes that the activity in question can be classified as an economic activity, which is not the position in this case.