TC09596 - [2025] UKFTT 00895 (TC)

The legal principles of VAT were identified by the UT in All Answers (Judges Richards and Brannan), which concerned an online business operated by the taxpayer who provided essays to order to customers in return for payment. The appellant operated a largely internet-based business. Customers accessing its website (“Customers”) could (in return for payment which is made to the appellant) order academic work, such as essays, dissertations or pieces of coursework, which are then written by third parties (“Writers”). The Writers tended to be teachers, lecturers and PhD students who were not employed by the appellant. The appellant did not disclose the Writers’ identities to the Customers, and vice versa.

The appellant and a Writer of a particular piece of work shared the fee paid by the purchasing Customer between them. The appellant retained around two-thirds of the fee, with the Writer obtaining the remaining one-third. If a Customer paid £240 for a piece of work, the appellant typically retained £160 of that amount and paid £80 to the Writer. HMRC contended that the appellant in that appeal made a single standard-rated supply of the academic work to a Customer and should account to HMRC for VAT on the full price paid by the Customer. The logic of HMRC’s case was that when the appellant pays the Writer £80, it is paying the Writer consideration for a separate supply made by the Writer to the Appellant. However, since Writers tended not be registered for VAT, the appellant was not entitled to credit for any input tax incurred in respect of this separate supply. The appellant’s case rested on the proposition that it entered into contracts for the provision of academic work as ‘agent’ for the Writer producing it.

The essence of the dispute between the parties revolved around the concept of “reciprocal performance” described in Tolsma. The UT considered the guidance given by Newey LJ in Adecco. The UT also considered the question of how to determine relevant aspects of the legal relationships between the parties in order to consider whether the £240 given to the appellant was consideration for a taxable supply made by the appellant. The UT noted that the CJEU had determined this question in Newey (CJEU), with reference to one of the questions referred and the answer given by the CJEU at [42] and [44] (supra).

One aspect of the UT’s examination of the contracts involved ascertaining whether Writers gave the appellant authority to make contracts on their behalf and, if so, whether the appellant exercised that authority by entering into contracts for the provision of academic work as agent for the Writers. In this respect, the UT referred to Lord Scarman’s dicta in Yeung Kai Yung v Hong Kong and Shanghai Banking Corporation [1981] AC 787. at 795:

“...it is not the case that, if a principal is liable, his agent cannot be. The true principle of law is that a person is liable for his engagements (as for his torts) even though he acts for another, unless he can show that by the law of agency he is to be held to have expressly or impliedly negatived his personal liability.”

At [28], the UT also considered the ways that an agent can conclude a contract on behalf of a principal by referring to Teheran-Europe Co. Ltd v S.T. Belton (Tractors) Ltd [1968] 2 WLR 523 (per Donaldson J), as follows:

“An agent can conclude a contract on behalf of his principal in one of three ways:

(a)

By creating privity of contract between the third party and his principal without himself becoming a party to the contract. The principal need not be named but the contract must show clearly that the agent was acting as such. Familiar examples are contracts made by X as agents and signed by X, the signature being claused “as agents only.” The consequence of such an arrangement is that the third party can only sue, and be sued by, the principal.

(b)

By creating privity of contract between the third party and his principal, whilst also himself becoming a party to the contract. The consequence of this arrangement is that the third party has an option whether to sue the agent or the principal, although this is of little practical value if he does not know of the principal's existence. Equally the third party is liable to be sued either by the agent or by the principal. Where both agent and principal are privy to the contract questions of election can arise (see Clarkson Booker Ltd. v. Andjel), but no such question arises in this case.

(c)

By creating privity of contract between himself and the third party, but no such privity between the third party and his principal. In other words, in relation to the third party he is a principal, but in relation to his principal he is an agent. The consequence of this arrangement is that the only person who can sue the third party or be sued by him is the agent.”

The UT then said this, at [30] and [31]:

“30.

Therefore, even if the Appellant did contract to supply academic work as agent for the Writer who produced that work, it remains possible that the Appellant was itself liable to the Customers under that contract. There being no suggestion in this case that there was any particular trade usage or custom, we will seek to discern the extent of the Appellant’s liability, if it did contractas agent, from the terms of the particular contracts and surrounding circumstances.

31.

Both the Writer Contract and the Customer Contract suffered from a lack of clarity as to their precise legal effect. Moreover, some of the provisions of those contracts contradicted each other…”

The critical question was, therefore, “What are the relevant rights and obligations of the parties according to the contract(s)”. At [41], the UT observed that:

“41.

Clause 14 of the Writer Contract dealt with intellectual property issues. Clause 14.1 provided as follows:

14.1

You agree that the intellectual property rights to the work submitted transfers to All Answers Ltd upon submission.”

The Writer therefore no longer owned the copyright to the work. The UT further observed that Clauses 1 and 2 of the Customer Contract immediately introduced a degree of confusion as to its overall effect. The terms of the contact were not clear and the appellant had contractual liability for the quality of the work provided.

At [48] and [51], the UT said this:

“48.

These two clauses therefore indicate that the Appellant is accepting a personal obligation to use reasonable care and skill in delivery of the work. That is emphasised by the fact that the Appellant is to be judged by the standard of a “competent research agency”. The clause does not suggest, for example, that the Writer has the sole obligation to deliver the work, or that the Writer’s conduct is to be assessed by reference to the standard of a competent academic. It does not even suggest that there is to be any claim against a Writer for a failure to deliver work to an acceptable standard. The only liability mentioned in Clause 4.2, and the only liability limited in Clause 4.3, is that of the Appellant.

…

51.

The conclusion that the Appellant, and not the Writer, was to be liable to the Customer for late delivery of the work is reinforced by other provisions of Clause 6. Clause 4.8 required a Customer who had not received work by the due date to contact the Appellant the next working day and clause 4.9 operated to limit the liability of the Appellant (with no reference to a liability of the Expert) if the Customer waited longer than this. Moreover, Clause 1.6 of the Customer Contract precluded the Customer from contacting the Writer and so a Customer’s only port of call if the work was delivered late was the Appellant.”

And, at [62]:

“Conclusion on the effect of the contracts

62.

Our conclusions on the effect of the Writer Contract and the Customer Contract are as follows:

(1)

By the Writer Contract, a Writer gave the Appellant authority to enter into contracts as agent on behalf of the Writer.

(2)

However, in the Customer Contract, the “core” obligations, to deliver the academic work, to the requisite standard and by the applicable deadline, were obligations that were binding on the Appellant only.

(3)

The “no plagiarism guarantee” was an exception. By Clause 7 of the Customer Contract, the Appellant agreed, as agent for the Writer, that if plagiarism was detected in the work provided, the Writer would pay the Customer £5,000. That obligation was binding on the Writer and not on the Appellant.

(4)

Pursuant to the Writer Contract, a Writer transferred the entire copyright in the relevant academic work to the Appellant. Having divested itself of that copyright, a Writer would be incapable of providing any licence to use that work to a Student, or indeed to anyone else.

(5)

Pursuant to the Customer Contract, the Appellant provided the Customer with only a limited right to use the work. That was different from the interest the Appellant obtained under the Writer Contract, namely the whole copyright in the work.”

At [24], the UT in All Answers applied the three-stage guidance, as follows:

“24.

In the light of that guidance, we will adopt the following approach:

(1)

First, we will ascertain the meaning and effect of relevant contractual terms so as to determine whether those terms impose an obligation on the Appellant or the Writer (or both) to provide the academic work to the Customer in return for the payment that the Customer makes to the Appellant.

(2)

Second, we will consider whether the contractual terms reflect commercial and economic reality.

(3)

In the light of our answers to questions (1) and (2), we will determine whether the Appellant made a supply of the academic work so as to become subject to an obligation to account for VAT.”

The starting point was the contracts.