The Court of Justice of the European Union (CJEU) has decided against the Wellcome Trust in a case about acting ‘as such’ when VAT registered but in connection with non-economic activities.

The result of the recent VAT case of Wellcome Trust (TC06761) was cautiously welcomed by CTG as being a helpful decision for those with a similar fact pattern to Wellcome, but it is worth noting that these facts are relatively unique to Wellcome. However, HMRC won their appeal against the decision after the CJEU decided against the Wellcome Trust.

The case concerns the application of the reverse charge to the receipt of investment management services by Wellcome from its non-EU suppliers. It was common ground in the agreed statement of facts that these services were consumed, in their entirety, by the Wellcome Trust, in pursuit of its non-economic investment activity.  Readers will recall that the ECJ has already famously determined that Wellcome’s investment activity is a non-economic activity and as a consequence, that no VAT in respect of this investment activity could be recovered. Against this factual background, it may well be that this taxpayer has a somewhat unique set of facts and therefore the decision, on an important point of law, does so against that set of facts. Nevertheless, HMRC is to appeal on the basis that the Tribunal erred in its interpretation of the law.

The specific EU law provision under consideration is Article 44, which has as a requirement, before the taxable supply moves to that of the customer, that the customer must be a taxable person “acting as such”.  The Tribunal was satisfied that these words must mean something and could not be ignored. HMRC was unable to convince the Tribunal that the words acting as such served no purpose or that they simply meant “taxable person” alone. The Tribunal considered the mandatory obligations of a taxable person to provide a VAT number when a taxable person is acting as such.  The Tribunal chairman found these obligations perfectly rational, creating a complete regime for determining the place of supply of services – which must work in tandem with the same requirements of Article 44 if double taxation is to be avoided.

Consequently, the Tribunal found that, as regards its non-EU investment activities, Wellcome was not a taxable person acting as such in respect of its receipt of investment management services from non-EU suppliers, and therefore the place of supply remains that of the supplier under Article 44 of the Principle VAT Directive. As the services in question were supplied by non-EU investment managers, there was no supply of services in the UK and hence no obligation to account for UK VAT.