UT/2024/000002 - [2025] UKUT 00188 (TCC)

The FTT was not adopting any presumption in favour of a single supply (but having concluded upon its contractual analysis – the right starting point - that there was a single supply) and was explaining why that was the case.

The reference to close link, as is clear from [291] spoke to the terminology used in Gloucestershire Hospitals) where the UT had found it useful (at [116(i)] of its decision) to consider “Are the different elements of the transaction closely linked?” The UT (and the FTT here which followed the same approach) proceeded according to the four sub-questions in its remaining reasoning. The UT (and equally the FTT here) did this as part of answering the Levob test namely “whether from the perspective of a typical consumer, two or more elements or acts supplied by the taxable person are so closely linked that they form (when viewed objectively) a single, indivisible economic supply which it would be artificial to divide up or split”. That was the sense of “closely linked” which the Advocate General in Frenetikexito, the latest case to consider the CJEU’s case-law and a case which was also incorporated within the UT’s analysis in Gloucestershire Hospitals referred to. (At paragraph 22 of her opinion Advocate General Kokott explained “Where there is a single complex supply, multiple elements of the supply form one sui generis supply. That is the situation, according to the Court’s case-law, where the supply by the taxable person consists of two or more elements or acts which are so closely linked that they form objectively, a single indivisible economic supply, which it would be artificial to consider separately.”) The Appellant does not argue the approach that was taken by the UT in Gloucestershire Hospitals was wrong. The factor of “closely linked” was not being used as a sufficient or decisive feature but part of what the UT in Gloucestershire Hospitals referred to (at [116]) as standing back and applying the Levob test “holistically”. The FTT was clearly not contemplating the kind of link between elements at issue in BGZ, Tellmer or Harley Davidson and saying that because of that link the supply was a single one. Having analysed the starting point that under the contract there was a single service, all the FTT was saying was that there was nothing in the contract which suggested the elements were not closely-linked in the sense that term was deployed in Levob.

The reference to the single economic purpose addressed the UT’s reference in Gloucestershire Hospitals’ discussion of the AG opinion in Frenetikexito- under the heading of indispensability to “Does the transaction have a single economic aim or is the combination of different elements important to the typical recipient of the supplies?”. There was, the FTT concluded, a single economic aim uniting the elements namely carrying on business in a regulatorily compliant way. The elements were each needed for that role. The FTT was not however reasoning that simply because the elements were necessary they were therefore indispensable but referring to necessity as a common feature that meant for instance a premises or HR supply would not be needed on its own without also the trading infrastructure supply in order to achieve the economic aim. It was thus the inter-relationship between the elements in contention that was key. It would be pointless to get Support Services without Business Delivery Services and vice versa as both were indispensable to enable SPLC to achieve its economic purpose. We also reject the argument that the FTT’s articulation of economic aim represented an error of law because it was put at too broad or high a level. Mr Hitchmough suggested the aim was in any case some kind generic aim that would apply to any supplier. While the Advocate General’s opinion in Frenetikexito pointed out that the presence of a single economic purpose is not inconsistent with separate supplies, the factor is clearly one which is embedded in the jurisprudence of the CJEU and there appears no principled basis for saying a single economic purpose is not a valid encapsulation of the service simply because of its breadth. As Mr Beal pointed out there are examples in the case law of a single supply being found on the basis of a package of supplies of everything that the recipient needs (for instance the single aim of providing a package of various primary healthcare services to an NHS body in respect of prisoners such as in Spectrum but where the contents of the package might differ). Also, as Mr Beal’s submissions highlighted, there was a purpose to packaging the back and mid-office functions entailed by the Business Delivery and Support Services needed by affiliates into a single supply to achieve standardisation and consistency.