[2010] UKFTT 363 (TC)

 

 

 

 

 

                                   

 

TC00645

Reference No: TC/2009/10458

 

 

Value Added Tax  -  Place of Supply  -  Provision of information by a partnership providing information to non-UK tour firms about the tours and accommodation provided to those customers   -   single or multiple supplies  -  Appeal dismissed

 

 

 

FIRST-TIER TRIBUNAL                                        

TAX CHAMBER

 

 

 

A.C. TOURS

Appellant

 

-and-

 

 

 

THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND CUSTOMS

Respondents

 

 

 

Tribunal:  HOWARD M. NOWLAN (Tribunal Judge)

 

 

 

Sitting in public in London on 22 July 2010 

 

 

 

 

Philip Beard of Edwards, Chartered Accountants, on behalf of the Appellant

James Rivett, counsel, on behalf of the Respondents

 

 

©CROWN COPYRIGHT 2010

 

 

 

DECISION

 

Introduction

 

1.     This case involved the supplies made by the Appellant partnership of hotel accommodation and tours in the UK to foreign tour firms. It was common ground that in accordance with the law at the time, the place of supply of the services was in the UK because the supplier belonged in the UK, such that VAT was chargeable on the supplies, unless just one exception to this normal rule applied.  It was accepted that all the other exceptions were irrelevant.  The one that it was claimed resulted in at least some of the services being treated as having been provided outside the UK, such that no VAT would be chargeable in respect of those services, was the rule relating to the supply of information to foreigners.

 

2.     There was no agreed statement of facts, and the Appellant’s document purporting to be an agreed statement of facts was neither agreed, nor did it refer to any of the facts.  It simply summarised the course of the dispute, but completely ignored what the dispute was about.  Since the Appellant, whilst represented by Mr. Beard, had declined to attend the hearing, one of the points advanced by counsel for the Respondents was that I should allow the Appeal on the simple ground that without the Appellant being able to prove any facts, the Appeal should necessarily be dismissed.

 

3.     I was reluctant to do this on the reasoning that there seemed to me to be a more practical and constructive way in which to proceed. Indeed counsel for the Respondents confirmed that the Respondents were prepared to accept that the documents that had been provided to me could be accepted at face value.

 

4.   Those documents revealed that the Appellant did provide considerable information to potential clients.   It also revealed however that having given whatever information was necessary, that either culminated in the supply of a tour (including say hotel accommodation, and trips round places of interest) and it was for that accommodation and those tours that the client then paid, or it failed to produce any business, in which case nothing was charged.

 

5.     Applying the ordinary principles for deciding whether the Appellant was making two or more supplies, one of which consisted of the “supply of information”, I came to the clear conclusion that the provision of information was not a separate supply.    It was little different than the supply of ancillary information that countless supplies of products and services will provide with a view to generating sales, and enabling customers to ensure that they choose intelligently, and secure what they want.   Such a provision of information is not a separate supply.  The only supplies made by this Appellant were those of accommodation, tours and trips, for which alone they charged and supplies of those descriptions were all rightly treated as made in the UK.

 

8.     The Appeal is accordingly dismissed.

 

 

 

The facts in more detail

 

9.    There are few additional facts in view of the failure to give evidence or to provide an agreed statement of facts. 

10.    One detail worth mentioning is that the Appellant partnership effectively worked in conjunction with a company called AC Tours Limited that was owned by the partners.  As I understood the un-documented arrangements between the company and the partnership, the partnership alone dealt with the foreign tour operators and clients.  It alone provided promotional information and dealt with other detailed questions about the choice of hotels, tours etc.  Once the partnership and the client had agreed on a particular tour, or particular accommodation, the partnership then engaged the company to book the chosen items and provide them to the partnership.     The company then made the requested bookings, and then billed the partnership for the total cost of these items together with a 5% mark-up for its administrative services.  Transport was generally zero-rated, and it would be zero-rated both in its provision by the transport operator, and by the company to the partnership.

 

11.    Having secured the accommodation, tours etc from the company, the partnership would then supply the same items to its foreign customer, on this occasion adding a 10-15% mark-up.  Transport remained zero-rated, and the input deduction in respect of everything else supplied, and charged for, by the company meant that additional VAT only had to be paid on the partnership’s own mark-up.  It was essentially this liability to VAT that was in dispute because presumably the Appellant’s argument was that this mark-up reflected the information that it provided to customers.  The bills to customers that we were shown never revealed the various mark-ups.  They simply identified whatever it was that was being booked, and identified accommodation down to the detail of how many double and single rooms had been booked. 

 

12.    The Appellant’s representative indicated that he had never known of an occasion where the Appellant had rendered a separate charge for the provision of information, either to a customer or intending customer who in the end booked nothing, or to a customer that did make a booking.  It was also said, both in documents and by the Appellant’s representative, that the amount of the partnership’s mark-up was geared largely to “whatever the particular transaction would stand”.

 

The law

 

13.     There are three points to mention in relation to the law.

 

14.    First I should mention that the decision in this case relates only to the law in force until 1 January 2010, when changed rules were introduced as regards “place of supply”.   Furthermore whilst the point of principle on which I was asked to reach a decision had been in dispute for numerous periods, the assessments in relation to some had been withdrawn under a concession.  This decision in principle relates thus just to those periods up to 1 January 2010 to which the concession did not apply.

 

15.     The only ground for saying that any of the Appellant’s services fell to be treated as supplied outside the UK, and thus outside the charge to VAT, was the argument that that element of the services related to the provision of information fell within paragraph 3 of Schedule 5 to the VAT Act 1994.   The only words of that paragraph that are relevant are the words “and provision of information (excluding from this head any services relating to land)”.

 

16.     The third relevant legal point, therefore, is that everything is governed by the case law in relation to principal and ancillary supplies, contrasted with multiple supplies.   In other words is the right analysis of this case that the Appellant supplied tours, or accommodation or trips, and that the provision of information about these matters was purely incidental, or did the Appellant provide the information as a separate and distinct service, whose VAT treatment is to be judged by focusing simply on that supply of information?

 

My decision

 

17.     The Appellant’s representative drew my attention to a case, which I regrettably consider not to be relevant. That case indicated simply that in appropriate circumstances it may very well be right to analyse the provision of services as a provision of two or more services, whereupon the VAT consequences are governed by addressing each in turn.  This is not remotely in dispute.

 

18.   Without quoting particular cases, there have recently been a number of authorities on the subject of the choice between the two analyses contrasted in paragraph 16.  I am directed to treat there as being only one service if there is one fundamental element to the service, particularly from the standpoint of how the customer or recipient of the service would describe the service that he received, and if all other elements are purely ancillary, fostering the better enjoyment of the principal element, and not providing “an end in itself”.     

 

19.    A factor that is of some relevance in considering this whole subject is the question of whether one or two charges are made.   In this case it is clear that only one charge is made.  Reinforcing the point that the test pays regard to the right analysis of the service from the perspective of the customer, it is noteworthy that none of the invoices make the remotest reference to the provision of information. Some information was probably of a promotional or advertising nature.  Some was probably just good information in relation to the choice of suitable hotels.   But no mention was made of any of it, nor indeed was there any reference to a mark-up.  There seems almost to have been an acceptance that it made better business sense to refer just to the selected tour, or selected accommodation, and ignore the mark-up and any reference to the provision of information.

 

20.    A factor that, it seems to me, has misled the Appellant into focusing on the provision of information, is that the Appellant has observed that it is the related company that books the accommodation or the tours. Thus if the partnership just concentrates on “what it adds”, it will have been tempting to regard the partnership’s role as relating entirely to the provision of initial promotional information and then the provision of information about detailed choices. That is essentially what the partnership added.  It is not however what the partnership provided.   The partnership paid the company for what the company provided to it, and then the partnership provided the whole tour to the customer.  The customer would plainly have agreed with this, and would have said without question that it received a service consisting of the provision of the tour from the partnership.  The customer almost certainly knew absolutely nothing about the internal division of roles, and probably did not even know that the company existed.  The result of this, and the undisputed contractual reality that the partnership provided the whole tour, and not just the “add-on’s” is that the VAT analysis depends on addressing the nature of the whole service provided.

 

21.     It is easy to provide similar examples that seem to me to confirm how obvious it is that there was no separate provision of an information service in this case.  A purchaser of a product will often receive considerable promotional information about a product, and will often discuss numerous questions about the product with the intending seller.  This seems to me to be an example of exactly the same point.   In the product example, there will be a supply of goods if the intending buyer actually buys the goods.  And there will be no supply if he does not buy the goods.   It would be unrealistic to suggest that the disappointed seller who has failed to make a sale might bill the customer for the information supplied about the product that the buyer in the end chose not to buy.  It would be equally unrealistic to suggest that in the case of the customer who does buy the product that the customer would consider it realistic if he was billed for both a product and for information about it that he was given when considering whether to buy or not.

 

22.     There will be cases, naturally, where the facts support a different analysis.   If a customer buys a product, and can then choose to pay for training in the use of the product, or ignore the offer of training if its workforce is already experienced in using the product, the training is clearly something distinct.  Equally if in this case, the customers had bought their tours from the company, and the partnership had expressed its role to be one of providing a “tour planning service” for a fee, and indeed a fee that would be charged for that service whether the related company sold the tour or not, the result would have been entirely different.   But that is only because the facts would have been entirely different.

 

23.     This Appeal is dismissed.

 

24.     This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

 

 

 

 

HOWARD M. NOWLAN (Tribunal Judge)

 

Released: 5 August 2010