Commissioners for Her Majesty’s Revenue and Customs v AXA UK plc.
Date: 2010-10-28
9. Each month, on a particular date, Denplan will seek to collect the payments due from dentists’ patients. To do so it creates for each patient an electronic file which it uses to transmit information to the Bankers’ Automated Clearing System (‘the BACS’), an automated inter-bank settlement system established and operated by a company all the members of which are major United Kingdom banks. The information which Denplan transmits to the BACS includes, in respect of each patient, the patient’s bank account number and the amount which Denplan is to collect from that account. The BACS will then transmit that information on to the processing centre of the relevant bank.
10. If the patient has not cancelled the direct debit mandate, and if the patient’s account remains open and is sufficiently in credit for the payment to be made, the bank will debit the patient’s account and notify the BACS accordingly. The BACS will then post a corresponding credit to Denplan’s bank for the credit of Denplan’s account. By this method, the amount requested is transferred from the patient’s bank account to Denplan’s bank account. The BACS sends Denplan reports as to which payments have been made and which have not. Denplan, in its turn, provides payment advices to the relevant dentists and contacts the patients whose payments it has not received.
20. Since that service encompasses various actions, it must, in the first place, be determined whether, for VAT purposes, and in particular the interpretation of the provision referred to in the questions referred, Denplan supplies its clients with several distinct and independent services requiring separate assessment or a single complex service comprising several elements (see, to that effect, in particular Case C‑41/04 Levob Verzekeringen and OV Bank  [2005] ECR I‑9433, paragraphs 18 and 20; Case C‑425/06 Part Service  [2008] ECR I‑897, paragraphs 48 and 49; and Case C‑461/08 Don Bosco Onroerend Goed  [2009] ECR I‑11079, paragraph 34).
21. Indeed, in certain circumstances, several formally distinct services, which could be supplied in isolation and thus give rise, separately, to taxation or exemption, must be considered to be a single transaction when they are not independent. This is particularly true where two or more elements or acts supplied by the taxable person to the customer are so closely linked that they form, objectively, a single, indivisible economic supply, which it would be artificial to split (see, to that effect, Part Service , paragraphs 51 and 53; Case C‑572/07 RLRE Tellmer Property [2009] ECR I‑4983, paragraphs 18 and 19; and Don Bosco Onroerend Goed , paragraphs 36 and 37).
22. According to the Court’s case-law, where a transaction comprises a bundle of features and acts, regard must be had to all the circumstances in which the transaction in question takes place in order to determine whether there are two or more distinct supplies or one single supply (see, to that effect, in particular Levob Verzekeringen and OV Bank , paragraph 19; Case C‑111/05 Aktiebolaget NN  [2007] ECR I‑2697, paragraph 21; and Don Bosco Onroerend Goed , paragraph 38).
23. As regards transactions such as those referred to in the decision making the reference, the actions performed by Denplan, examined for the purposes of VAT, are indissociably connected. The economic purpose of those actions is the transfer of the sum due each month from the patient to the dentist. The transfer of the sum due to the service supplier’s bank account is of no use to its client unless that sum, less the service supplier’s remuneration, is then paid to the client and the service supplier accounts to that client for the sums received. Consequently, the service in question in the main proceedings, in circumstances such as those described by the referring court, must be regarded as forming a single transaction for the purposes of VAT.
24. As regards, in the second place, the issue whether a service such as that in question in the main proceedings comes within the exemption from VAT under Article 13B(d)(3) of the Sixth Directive relating to transactions concerning payments or transfers, it is settled case-law, in that regard, that the exemptions referred to in Article 13 constitute independent concepts of European Union law whose purpose is to avoid divergences in the application of the VAT system as between one Member State and another (see, in particular, Case C‑169/04 Abbey National  [2006] ECR I‑4027, paragraph 38; Case C‑455/05 Velvet & Steel Immobilien  [2007] ECR I‑3225, paragraph 15; Case C‑242/08 Swiss Re Germany Holding  [2009] ECR I‑10099, paragraph 33; and Case C‑86/09 Future Health Technologies  [2010] ECR I‑0000, paragraph 28).
25. It is also clear from the case-law that the terms used to specify the exemptions set out in Article 13 of the Sixth Directive are to be interpreted strictly, since they constitute exceptions to the general principle that VAT is to be levied on all goods and services supplied for consideration by a taxable person. Nevertheless, the interpretation of those terms must not deprive the exemption in question of its intended effect (see, to that effect, Don Bosco Onroerend Goed , paragraph 25 and the case-law cited; Future Health Technologies , paragraph 30; and Case C‑581/08 EMI Group  [2010] ECR I–0000, paragraph 20).
26. It should also be noted that the transactions exempted under Article 13B(d)(3) of the Sixth Directive are defined in terms of the nature of the services provided and not in terms of the person supplying or receiving the service (see SDC , paragraphs 32 and 56; Case C-305/01 MKG-Kraftfahrzeuge-Factoring [2003] ECR I‑6729, paragraph 64; and Swiss Re Germany Holding , paragraph 44 and the case-law cited). The exemption is therefore not subject to the condition that the transactions be effected by a certain type of institution or legal person, where the transactions in question relate to the sphere of financial transactions (see, to that effect, SDC , paragraph 38; Velvet & Steel Immobilien , paragraph 22; and Swiss Re Germany Holding , paragraph 46).
27. Finally, the Court has ruled, as regards various exemptions under Article 13B(d) of the Sixth Directive, that, in order to be regarded as exempt transactions the services in question must, viewed broadly, form a distinct whole, fulfilling the specific, essential functions of a service described in that provision (see, to that effect, SDC , paragraphs 66 and 75 (relating to Article 13B(d)(3) and (5) of the Sixth Directive); Case C‑235/00 CSC Financial Services  [2001] ECR I-10237, paragraphs 25 and 27 (relating to Article 13B(d)(5)); and Abbey National , paragraph 70 (as regards Article 13B(d)(6)).
29. In the absence of a definition of the term ‘debt collection and factoring’ in the Sixth Directive, it is necessary to view the final words of Article 13B(d)(3) of the Sixth Directive in their context and to interpret them in the light of the spirit of the provision in question and, more generally, of the scheme of that directive ( MKG-Kraftfahrzeuge-Factoring , paragraph 70; see to that effect, also, Case 173/88 Henriksen  [1989] ECR 2763, paragraph 11; and Case C‑16/93 Tolsma  [2004] ECR I‑743, paragraph 10).
30. Although, as observed in paragraph 25 of the present judgment, the exemptions under Article 13 of the Sixth Directive, as derogations from the general application of VAT, are to be interpreted strictly, the term ‘debt collection and factoring’ is to be interpreted broadly as it is an exception to such derogation, with the result that the transactions which it covers are subject to tax in accordance with the fundamental rule forming the basis of the Sixth Directive (see MKG-Kraftfahrzeuge-Factoring , paragraphs 72, 73 and 75, and, by analogy, Case C‑171/00 P Libéros  v Commission  [2002] ECR I‑451, paragraph 27).
31. According to the Court’s case-law, the term ‘debt collection and factoring’ in Article 13B(d)(3) of the Sixth Directive refers to financial transactions designed to obtain payment of a pecuniary debt (see MKG-Kraftfahrzeuge-Factoring , paragraph 78).
33. In fact, the object of that service is to benefit Denplan’s clients, namely dentists, by payment of the sums of money due to them from their patients. That service is therefore intended to obtain the payment of debts. By undertaking the recovery of debts for the account of those entitled to them, Denplan frees its clients of tasks which, without its intervention, those clients, as creditors, would have to perform themselves, tasks consisting in requesting the transfer of the sums due to them, via the direct debit system.
34. Contrary to the Commission’s submission, it is irrelevant that such service is supplied at the time when the debts concerned become due. The final words of Article 13B(d)(3) of the Sixth Directive cover the collection of debts of any nature, without limiting their application to debts which were not paid on their due date. Moreover, factoring, all forms of which are included in the terms ‘debt collection and factoring’ (see MKG-Kraftfahrzeuge-Factoring , paragraph 77), is not limited to debts in respect of which the debtor has already defaulted. It can also have as its object debts which have not yet become due and which will be paid on the due date.