Commissioners of Customs & Excise v CSC Financial Services Ltd.
Date: 2001-12-13
7 Sun Alliance, which groups together a number of companies that manage investment funds and personal equity plans, entrusted to CSC all communications and contacts with the public concerning an investment product known as the Daisy Personal Equity Plan, under which investment is made by means of units in a unit trust.
23 It is important to note that the wording of Article 13B(d)(5) of the Sixth Directive does not in principle preclude a transaction in securities from being broken down into a number of separate services which may together amount to a transaction in securities within the meaning of that provision and which may benefit from the exemption laid down therein (see, to that effect, with regard to transactions concerning transfers, within the meaning of Article 13B(d)(3) of the Sixth Directive, paragraph 64 of the judgment in SDC).
24 It is therefore necessary to determine what the conditions are for that exemption and whether those conditions are satisfied in the case of services such as those provided by CSC in the main proceedings.
25 In paragraph 66 of its judgment in SDC, the Court held that, in order to be characterised as exempt transactions for the purposes of Article 13B(d)(3) and (5), the services provided by a data-handling centre must, viewed broadly, form a distinct whole, fulfilling in effect the specific, essential functions of a service described in those two provisions.
26 As regards, more specifically, transactions concerning transfers within the meaning of Article 13B(d)(3) of the Sixth Directive, it is clear from the judgment in SDC that the services provided must have the effect of transferring funds and entail changes of a legal and financial character. The Court held at paragraph 66 of its judgment in SDC that a service exempt under the Sixth Directive must be distinguished from a mere physical or technical supply, such as making a data-handling system available to a bank and that, in this regard, the national court must examine in particular the extent of the data-handling centre's responsibility vis-à-vis the banks, in particular the question whether its responsibility is restricted to technical aspects or whether it extends to the specific, essential aspects of the transactions.
27 In principle, the same analysis applies, mutatis mutandis, with regard to transactions in securities within the meaning of Article 13B(d)(5) of the Sixth Directive.
28 As the Court emphasised at paragraph 73 of its judgment in SDC, trade in securities involves acts which alter the legal and financial situation as between the parties and are comparable to those involved in the case of a transfer or a payment. The supply of a mere physical, technical or administrative service, which does not alter the legal or financial situation would not, therefore, appear to be covered by the exemption laid down in Article 13B(d)(5) of the Sixth Directive.
30 By introducing an exception to the exemption laid down by Article 13B(d)(5) for transactions in securities, the phrase excluding management and safekeeping which appears in that provision places the management and safekeeping of shares under the general scheme of the directive, whereby VAT is to be charged on all taxable transactions, except in the case of derogations expressly provided for. It therefore follows that services of an administrative nature which do not alter the legal or financial position of the parties are not covered by the exemption laid down in Article 13B(d)(5).
32 Lastly, the mere fact that a constituent element is essential for completing an exempt transaction does not warrant the conclusion that the service which that element represents is exempt (paragraph 65 of the judgment in SDC).
33 It follows from the foregoing that the words transactions in securities refer to transactions liable to create, alter or extinguish parties' rights and obligations in respect of securities.
Interpretation of the words negotiation in securities
Observations submitted to the Court
38 Clearly, the words including negotiation are not intended to define the principal object of the exemption laid down in the provision, but to extend the scope of the exemption to negotiation.
39 It is not necessary to consider the precise meaning of the word negotiation, which also appears in other provisions of the Sixth Directive, in particular, Article 13B(d)(1) to (4), in order to hold that, in the context of Article 13B(d)(5), it refers to the activity of an intermediary who does not occupy the position of any party to a contract relating to a financial product, and whose activity amounts to something other than the provision of contractual services typically undertaken by the parties to such contracts. Negotiation is a service rendered to, and remunerated by a contractual party as a distinct act of mediation. It may consist, amongst other things, in pointing out suitable opportunities for the conclusion of such a contract, making contact with another party or negotiating, in the name of and on behalf of a client, the detail of the payments to be made by either side. The purpose of negotiation is therefore to do all that is necessary in order for two parties to enter into a contract, without the negotiator having any interest of his own in the terms of the contract.
40 On the other hand, it is not negotiation where one of the parties entrusts to a sub-contractor some of the clerical formalities related to the contract, such as providing information to the other party and receiving and processing applications for subscription to the securities which form the subject-matter of the contract. In such a case, the subcontractor occupies the same position as the party selling the financial product and is not therefore an intermediary who does not occupy the position of one of the parties to the contract, within the meaning of the provision in question.