Emerchantpay Limited v The Commissioners for HMRC
Decision date: 9 September 2022
Neutral citation: [2022] UKFTT 334 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
This appeal concerned whether supplies made by a Bulgarian group company (EMPO) to the UK trading company (EMPL) were VAT-exempt intermediary financial services and whether HMRC's assessments were time-barred. The First-tier Tribunal found on the balance of probabilities that EMPO performed substantial operational activities (underwriting, due diligence, onboarding, matching merchants to acquirers, risk, treasury and IT) that amounted to financial intermediation and so the supplies were exempt under Schedule 9 Group 5 VATA. The tribunal did not decide the time-limit point and made no findings on whether HMRC’s assessments were issued out of time. The appeal was allowed and the assessments were effectively set aside on the exemption basis.
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: high
The tribunal’s ratio is that VAT characterisation depends on the economic reality and nature of the services provided rather than contractual labels; where a supplier performs substantial activities whose principal feature is bringing together parties or negotiating on their behalf (introductions/onboarding/preparatory work), those supplies can properly be treated as intermediary financial services and therefore fall within the Schedule 9 Group 5 exemption. A composite supply is to be characterised by its principal feature for exemption purposes.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The tribunal noted but did not decide the statutory time-limit issue because it was unnecessary once the exemption point was resolved. It also observed that absence of formal inter-group outsourcing agreements and the presence of a transfer pricing arrangement allocating costs does not by itself determine the legal VAT characterisation of the services.