UT/2024/000008 - [2025] UKUT 00100 (TCC)

HMRC’s first ground of appeal is that the FTT erred in adopting a high-level or general approach to the question of comparability.

Our starting point is the decisions of the CJEU in Madgett and iSt. In Madgett, the CJEU refers to “identical transactions” and “identical services” (Madgett [21] and [22]) and, in iSt, to services that are “identical or at least comparable” to those provided by travel agents and tour operators (iSt [24]) as falling within the scope of the special scheme. Ms Mitrophanous KCrelies on these cases in support of her submission that the scope of the scheme is defined by reference to services that would be provided by travel agents and tour operators. She also points out, which we accept, that the references to services that are “generally associated with that kind of activity” in Madgett [23] and iSt [24] are references to services that form part of the supply that is made by the other trader to whom the provision of the supply has been entrusted and is not, as the FTT appears to suggest at FTT [106], support for a broader approach to the question of comparability itself.

Ms Mitrophanous KC also relied on the CJEU decision in Star Coaches s.r.o. v Financni reditelstvi pro hlavni mesto Prahu (Case C-220/11) (“Star Coaches”) in support of her submission that the FTT was wrong to adopt the high-level approach.

Star Coaches concerned a Czech transport company that provided coach travel services to travel agents in the Czech Republic and other EU member states either using its own coaches or coaches provided by subcontractors. There were two questions before the CJEU. The first was whether the special scheme related only to supplies made by travel agents to end-users (i.e. travellers) or whether it could apply to supplies made to other customers. The second was whether a transport company that provides coach transport to travel agents (and not directly to travellers) and does not provide any other services could be treated as a travel agent for the purposes of the special scheme.

The CJEU did not find it necessary to answer the first question. The CJEU answered the second question in the following terms (at Star Coaches [26]):

In reaching that conclusion, the CJEU stated that it could not rule out the possibility that the services of an operator of public transport, which when not using his own coaches, used the services of subcontractors might fall within the special scheme (Star Coaches [22]) However, it was also “necessary that those services cannot be reduced to a single service” (Star Coaches [23]) i.e. that the taxpayer must be making other supplies in addition to the transport services.

As we have explained, the latter point – the requirement for transport services to be part of a wider package of services if they are to fall within the special scheme – has been superseded by later case law (Alpenchalets [28] and [33], Dragoram [33]). Ms Mitrophanous KC quite correctly does not rely on Star Coaches as authority for such a proposition. She does, however, rely on the CJEU decision in Star Coaches, as interpreted by the CJEU in Alpenchalets, as support for her assertion that the mere resupply of passenger transport services is not sufficient to fall within the scope of the special scheme; some “other feature” is required. On her argument, as we understand it, that feature is derived from comparison with the supplies that are typically made by travel agents and tour operators. Ms Mitrophanous KC takes these points from the passage in the CJEU’s decision in Alpenchalets (at Alpenchalets [32]) where the CJEU says this, when commenting on the decision in Star Coaches:

The FTT discussed the decision in Star Coaches (at FTT [63]-[65]) and concluded that:

Ms Mitrophanous KC criticized the FTT’s analysis of both the CJEU’s decision in Star Coaches and the commentary on it by the CJEU in Alpenchalets. In particular, she said that the FTT’s analysis proceeded on a misunderstanding of the CJEU’s decision in Alpenchalets in that the FTT assumed that Star Coaches had provided services “as a subcontractor” rather than “through a subcontractor”. We do not read the FTT decision in that way. It seems to us that in the relevant passage in FTT [65], the FTT is referring to the fact that the taxpayer company did not make supplies directly to travellers. It made its supplies (whether using its own coaches or those of its own subcontractors) to travel agents. So, in effect, it was a subcontractor of the travel agents and not acting as a travel agent or tour operator itself. That explanation is consistent with the approach of the CJEU in Alpenchalets and its decision in Star Coaches.

Having considered the wider case law, it seems to us that the authorities do support a broader approach than Ms Mitrophanous KC advances.

In the paragraphs in which the CJEU in Madgett ([20] and [22]) is addressing the particular facts of the case, it refers to the trader in that case having provided “identical services” to a travel agent or tour operator. However, when it states the general principle (at Madgett [23]), the CJEU refers to traders who are not travel agents or tour operators falling within the scheme where they “organize travel… in their own name and entrust other taxable persons with the supply of the services generally associated with that kind of activity”.

The principles are expressed in similarly general terms by the CJEU in iSt (at iSt [24] and [34]). In iSt, the CJEU expressly refused to adopt a restrictive interpretation of the concept of “travel” for the purposes of Article 306. The Court expressed the test simply by reference to the provision of travel services as principal using supplies and services provided by others, the only relevant exception as being whether the travel services are ancillary to another supply (iSt [34]). These comments mirror those of the Advocate General in iSt (see the Advocate General’s opinion at [22] and [33]).

The CJEU has found that various supplies that might not be regarded as typical of supplies by travel agents and tour operators fall within the scheme. For example:

An important question for us is whether this broader approach is such that it extends to all supplies of “passenger transport services” in accordance with the highest-level approach adopted by the FTT. We note, in passing, that HMRC in its VAT Notice refers to supplies of passenger transport as always falling within the scope of the special scheme. However, we do not base our conclusion on the VAT Notice. Despite the broad approach in the CJEU case law, we do not think it can be concluded that, on all possible facts, everything which is “passenger transport” falls, per se and with no possibility of any further consideration, within the scheme. However, that does not mean that the approach is not a broad, high-level one; we conclude that it is. On the facts of this case, we are satisfied that none of the matters to which HMRC point in Grounds 1a, 2 and 2a (which we discuss below and which also form part of Issue 1), or generally, are sufficient to disturb the conclusion that at an appropriately high-level and, subject to the issues raised by Ground 4, the supplies made by Bolt are capable of falling within the scheme.

We agree with the FTT that a detailed approach to the question of comparability would be likely to prove a difficult and resource-intensive exercise. This is particularly the case if the tribunal were required to examine in detail the proportion of the supplies of established travel agents and tour operators that fall into a particular category or to engage in an analysis of the potential risks of distortion of competition if a particular supply falls within or without the scope of the scheme. There is no evidence in the CJEU case law that it is necessary to embark upon such an analysis, nor do we think it is desirable or necessary.